e424b3
CALCULATION
OF REGISTRATION FEE
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Proposed Maximum
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Proposed Maximum
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Title of Each Class of
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Amount to be
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Offering Price per
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Aggregate Offering
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Amount of
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Securities to be Registered
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Registered
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Unit
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Price
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Registration Fee(1)
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Ordinary shares, no par value per share
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28,750,000
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$33.95
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$976,062,500
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$113,321
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(1) |
The filing fee reflects the potential additional issuance of up
to 3,750,000 ordinary shares pursuant to an over-allotment
option. In accordance with Rules 456(b) and 457(r), the
registrant deferred payment of all of the registration fee for
Registration Statement
No. 333-168621
filed by the registrant on August 6, 2010.
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Filed
pursuant to Rule 424(b)(3)
Registration
No. 333-168621
(To Prospectus dated August 6, 2010)
25,000,000 Shares
Ordinary Shares
The selling shareholders identified in this prospectus
supplement, including entities affiliated with certain directors
of our company, are offering all of the ordinary shares offered
hereby and will receive all of the proceeds from this offering.
See Selling Shareholders.
Our ordinary shares are listed on The Nasdaq Global Select
Market under the symbol AVGO. On May 27, 2011,
the closing price of our ordinary shares as reported on The
Nasdaq Global Select Market was $35.01.
See Risk Factors on
page S-4
of this prospectus supplement to read about factors you should
consider before buying our ordinary shares.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
securities nor passed upon the accuracy or adequacy of the
disclosures in the prospectus supplement. Any representation to
the contrary is a criminal offense.
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Per Share
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Total
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Public offering price
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$
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33.95
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$
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848,750,000
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Underwriting discount
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$
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0.34
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$
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8,500,000
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Proceeds to the selling shareholders
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$
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33.61
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$
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840,250,000
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To the extent that the underwriters sell more than 25,000,000
ordinary shares, the underwriters have a 30-day option to
purchase up to an additional 3,750,000 ordinary shares solely to
cover over-allotments, if any, from the selling shareholders at
a price of $33.61 per share.
The underwriters expect to deliver the ordinary shares against
payment on or about June 3, 2011.
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Deutsche
Bank Securities |
Barclays Capital |
Citi |
The date of this prospectus supplement is May 31, 2011
TABLE OF
CONTENTS
Prospectus
Supplement
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Page
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S-iii
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S-iii
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S-v
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S-1
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S-4
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S-26
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S-26
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S-26
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S-27
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S-30
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S-35
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S-40
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S-40
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S-40
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S-41
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Prospectus
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S-i
You should rely only on the information contained or
incorporated by reference in this prospectus supplement and the
accompanying prospectus. Neither we, the selling shareholders
nor the underwriters have authorized anyone to provide you with
information different from that contained in, or incorporated by
reference into, this prospectus supplement and the accompanying
prospectus. The selling shareholders are offering to sell, and
seeking offers to buy, ordinary shares only in jurisdictions
where offers and sales are permitted. The information contained
in, or incorporated by reference into, this prospectus
supplement and the accompanying prospectus is accurate only as
of the date on the front cover of this prospectus supplement, or
other date stated in this prospectus supplement, regardless of
the time of delivery of this prospectus supplement and the
accompanying prospectus or of any sale of our ordinary
shares.
For investors outside the United
States: Neither we, the selling shareholders nor
any of the underwriters have done anything that would permit
this offering or possession or distribution of this prospectus
supplement and the accompanying prospectus in any jurisdiction
where action for that purpose is required, other than in the
United States. You are required to inform yourselves about and
to observe any restrictions relating to this offering and the
distribution of this prospectus supplement and the accompanying
prospectus.
S-ii
ABOUT
THIS PROSPECTUS SUPPLEMENT
This document is in two parts. The first part is this prospectus
supplement, which describes the specific terms of this offering.
The second part, the base prospectus, gives more general
information, some of which may not apply to this offering. You
should read both this prospectus supplement and the accompanying
prospectus, together with the additional information described
under the headings Where You Can Find More
Information and Incorporation by Reference.
If the description of this offering varies between this
prospectus supplement and the accompanying prospectus, you
should rely on the information in this prospectus supplement.
Our website address is www.avagotech.com. Information contained
on our website does not constitute part of this prospectus
supplement or the accompanying prospectus.
Neither this prospectus supplement nor the accompanying
prospectus has been, and neither will be, registered as a
prospectus with the Monetary Authority of Singapore.
Accordingly, this prospectus supplement and any other document
or material in connection with the offer or sale, or invitation
for the subscription or purchase, of any of the securities
registered hereby may not be circulated or distributed, nor may
any of the securities registered hereby be offered or sold, or
be made the subject of an invitation for subscription or
purchase, whether directly or indirectly, to persons in
Singapore, other than pursuant to, and in accordance with, the
conditions of applicable provisions of the Securities and
Futures Act (Chapter 289) of Singapore. See
Underwriting Selling Restrictions
Singapore.
As used in this prospectus supplement, Avago,
the Company, we, our or
us refer to Avago Technologies Limited and its
subsidiaries on a consolidated basis, unless otherwise indicated.
SPECIAL
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus supplement and the accompanying prospectus and
documents incorporated by reference into this prospectus
supplement may contain forward-looking statements
within the meaning of the federal securities laws, which involve
risks and uncertainties. You can identify forward-looking
statements because they contain words such as
believe, expect, may,
will, should, seek,
intend, plan, estimate, or
anticipate or similar expressions that concern our
strategy, plans or intentions. All statements other than
statements of historical fact could be deemed forward-looking,
including, but not limited to, any projections of financial
information and estimates of financial results; any statements
about historical results that may suggest trends for our
business; any statements of the plans, strategies and objectives
of management for future operations; any statements of
expectation or belief regarding future events, technology
developments, or enforceability of our intellectual property
rights and anticipated litigation expenses; and any statements
of assumptions underlying any of the foregoing. All statements
we make relating to estimated and projected product sales,
earnings, margins, costs, expenditures, cash flows, growth rates
and financial results are forward-looking statements. These
forward-looking statements are based on current expectations,
estimates, forecasts and projections of future Company or
industry performance based on managements judgment,
beliefs, current trends and market conditions and involve risks
and uncertainties that may cause actual results to differ
materially from those contained in the forward-looking
statements. We derive most of our forward-looking statements
from our operating budgets and forecasts, which are based upon
many detailed assumptions. While we believe that our assumptions
are reasonable, we caution that it is very difficult to predict
the impact of known factors, and, of course, it is impossible
for us to anticipate all factors that could affect our actual
results. Accordingly, we caution you not to place undue reliance
on these statements. Important factors that could cause actual
results to differ materially from our expectations are disclosed
under Risk Factors, elsewhere in this prospectus
supplement, or incorporated by reference into this prospectus
supplement, including, without limitation, in conjunction with
the forward-looking statements included in this prospectus
supplement. Some of the factors that we believe could affect our
results include:
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cyclicality in the semiconductor industry or in our target
markets and general economic conditions;
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quarterly and annual fluctuations in operating results;
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our ability to adapt to technological changes in the
semiconductor industry;
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S-iii
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our dependence on contract manufacturing and outsourced supply
chain and our ability to improve our cost structure through our
manufacturing outsourcing program;
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prolonged disruptions of our manufacturing facilities or other
significant operations;
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inability to continuously improve manufacturing efficiency and
quality;
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our competitive performance and ability to continue achieving
design wins with our customers;
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our ability to protect our intellectual property, defending
against third-party intellectual property claims and associated
increases in litigation expenditures;
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investment in research and development;
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departure of key senior managers and the ability to retain and
attract key personnel;
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any expenses or reputational damage associated with resolving
customer product and warranty and indemnification claims and
product recalls;
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our increased dependence on outsourced service providers for
certain key business services and their ability to execute to
our requirements;
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currency fluctuations;
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loss of one or more of our significant customers;
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risks relating to the transaction of business internationally;
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the effects of war, terrorism, natural disasters or other
catastrophic events;
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our ability to maintain tax concessions in certain jurisdictions;
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changes in tax laws;
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our ability to achieve the growth prospects and synergies
expected from our acquisitions and delays and challenges
associated with integrating acquired companies with our existing
businesses;
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the effects of government regulation on our business;
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risks associated with additional, material restructuring charges;
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dependence on and risks associated with distributors of our
products;
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our ability to generate cash sufficient to fund our research and
development, capital expenditures and other business
needs; and
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other events and trends on a national, regional and global
scale, including those of a political, economic, business,
competitive and regulatory nature.
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All of the forward-looking statements are qualified in their
entirety by reference to the factors listed above and those
discussed under the heading Risk Factors in this
prospectus supplement. All forward-looking statements are based
on information currently available to us. All of our
forward-looking statements, including those included and
incorporated by reference in this prospectus supplement and the
accompanying prospectus are qualified in their entirety by this
statement.
We caution you that the foregoing list of important factors may
not contain all of the material factors that are important to
you. In addition, in light of these risks and uncertainties, the
matters referred to in the forward-looking statements contained
in this prospectus supplement may not in fact occur. We
undertake no obligation to publicly update or revise any
forward-looking statement as a result of new information, future
events or otherwise, except as otherwise required by law.
You should carefully read this prospectus supplement, the
accompanying prospectus and the documents incorporated by
reference in their entirety. They contain information that you
should consider when making your investment decision.
S-iv
ENFORCEMENT
OF CIVIL LIABILITIES UNDER
UNITED STATES FEDERAL SECURITIES LAWS
We are incorporated under the laws of the Republic of Singapore,
and certain of our officers and directors are residents outside
the United States. Moreover, a majority of our consolidated
assets are located outside the United States. Although we
are incorporated outside the United States, we have agreed to
accept service of process in the United States through our agent
designated for that purpose. Nevertheless, since a majority of
the consolidated assets owned by us are located outside the
United States, any judgment obtained in the United States
against us may not be collectible within the United States.
There is no treaty between the United States and Singapore
providing for the reciprocal recognition and enforcement of
judgments in civil and commercial matters and a final judgment
for the payment of money rendered by any federal or state court
in the United States based on civil liability, whether or not
predicated solely upon the federal securities laws, would,
therefore, not be automatically enforceable in Singapore. There
is doubt whether a Singapore court may impose civil liability on
us or our directors and officers who reside in Singapore in a
suit brought in the Singapore courts against us or such persons
with respect to a violation solely of the federal securities
laws of the United States, unless the facts surrounding such a
violation would constitute or give rise to a cause of action
under Singapore law. Consequently, it may be difficult for
investors to enforce against us, our directors or our officers
in Singapore judgments obtained in the United States which are
predicated upon the civil liability provisions of the federal
securities laws of the United States.
S-v
PROSPECTUS
SUPPLEMENT SUMMARY
This summary highlights selected information about us and the
offering of the ordinary shares. This summary is not complete
and does not contain all of the information that may be
important to you. You should read carefully this entire
prospectus supplement and the accompanying prospectus, including
the Risk Factors section, and the other documents
that we refer to and incorporate by reference herein for a more
complete understanding of us and this offering. In particular,
we incorporate by reference important business and financial
information into this prospectus supplement and the accompanying
prospectus.
Our
Company
We are a leading designer, developer and global supplier of a
broad range of analog semiconductor devices with a focus on
III-V based products. We differentiate ourselves through our
high performance design and integration capabilities. III-V
semiconductor materials have higher electrical conductivity,
enabling faster speeds and tend to have better performance
characteristics than conventional silicon in applications such
as radio frequency, or RF, and optoelectronics. III-V refers to
elements from those groups in the periodic table of chemical
elements, and examples of these materials are gallium arsenide
(GaAs), gallium nitride (GaN) and indium phosphide (InP). Our
product portfolio is extensive and includes over 6,500 products
in four primary target markets: wireless communications, wired
infrastructure, industrial and automotive electronics, and
consumer and computing peripherals. Applications for our
products in these target markets include cellular phones,
consumer appliances, data networking and telecommunications
equipment, enterprise storage and servers, factory automation,
displays, optical mice and printers.
We have an almost
50-year
history of innovation dating back to our origins within
Hewlett-Packard Company. Over the years, we have assembled a
large team of analog design engineers, and we maintain design
and product development engineering resources around the world.
Our locations include two design centers in the United States,
five in Asia and four in Europe. We have developed an extensive
portfolio of intellectual property that currently includes more
than 5,000 U.S. and foreign patents and patent applications.
We have a diversified and well-established customer base of
approximately 40,000 end customers which we serve through our
multi-channel sales and fulfillment system. We distribute most
of our products through our broad distribution network, and a
significant portion of our sales are to two of the largest
global electronic components distributors, Avnet, Inc. and Arrow
Electronics, Inc. We also have a direct sales force focused on
supporting large original equipment manufacturers, or OEMs. For
the year ended October 31, 2010, our top 10 customers,
which included five distributors, collectively accounted for 55%
of our net revenue. For the quarter ended January 30, 2011,
our top 10 customers, which included three distributors,
collectively accounted for 52% of our net revenue.
We focus on maintaining an efficient global supply chain and a
variable, low-cost operating model. Accordingly, we have
outsourced a majority of our manufacturing operations. We have
over 40 years of operating history in Asia, where
approximately 60% of our employees are located and where we
produce and source the majority of our products. Our presence in
Asia places us in close proximity to many of our customers and
at the center of worldwide electronics manufacturing.
Recent
Developments
Recent
Operating Results for the Fiscal Quarter Ended May 1, 2011
(Unaudited)
The following information is based on our unaudited results as
of, and for the fiscal quarter ended, May 1, 2011, which we
announced on May 24, 2011. This information should be read
in conjunction with our consolidated financial statements and
related notes incorporated by reference into this prospectus
supplement. The results described below may not be indicative of
results to be expected in any future period.
Our net revenue for the quarter ended May 1, 2011 was
$560 million, an increase of 2 percent compared with
the quarter ended January 30, 2011, and up 9 percent
from the quarter ended May 2, 2010. Our gross margin for
the quarter ended May 1, 2011 was $275 million, or
49.1 percent of net revenue. This compares with gross
margin of $271 million, or 49.3 percent of net revenue
for the previous quarter, and gross margin of $233 million,
or
S-1
45.2 percent of net revenue in the same fiscal quarter last
year. Operating expenses were $137 million for the quarter
ended May 1, 2011. This compares with $129 million in
the previous quarter and $125 million in the same fiscal
quarter last year. Income from operations for the quarter ended
May 1, 2011 was $138 million, which compares with
$142 million the previous quarter and $108 million in
the same fiscal quarter last year. Net income for the quarter
ended May 1, 2011 was $135 million, or $0.54 per
diluted share. This compares with net income of
$119 million, or $0.48 per diluted share for the quarter
January 30, 2011, and $90 million, or $0.37 per
diluted share in the quarter ended May 2, 2010.
Our cash and cash equivalent balance as of May 1, 2011 was
$596 million, compared to $363 million as of
January 30, 2011. The increase over the previous quarter is
primarily due to cash provided by operating activities of
$251 million.
In addition, on March 30, 2011, we paid an interim cash
dividend of $0.08 per ordinary share, totaling approximately
$20 million in the aggregate.
Corporate
and Other Information
Avago Technologies Limited was incorporated under the laws of
the Republic of Singapore in August 2005. Our Singapore company
registration number is 200510713C. The address of our registered
office and our principal executive offices is 1 Yishun Avenue 7,
Singapore 768923, and our telephone number is +65-6755-7888. We
are the successor to the Semiconductor Products Group of Agilent
Technologies, Inc., which we acquired on December 1, 2005.
All of our operations are conducted through our various
subsidiaries, which are organized and operated according to the
laws of their country of incorporation, and consolidated by
Avago Technologies Limited.
S-2
The
Offering
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Issuer |
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Avago Technologies Limited |
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Ordinary shares offered by the selling shareholders |
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25,000,000 shares (or 28,750,000 shares if the
underwriters exercise in full their over-allotment option to
purchase additional shares) |
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Ordinary shares outstanding after this offering |
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243,427,133 shares |
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Risk factors |
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Investment in our ordinary shares involves risk. You should
carefully consider the information set forth in the Risk
Factors section of this prospectus supplement and
accompanying prospectus as well as the other information
included in or incorporated by reference in this prospectus
supplement and the accompanying prospectus before deciding
whether to invest in our ordinary shares. See Risk
Factors beginning on
page S-4
of this prospectus supplement for a discussion of the factors
you should carefully consider before deciding to invest in our
ordinary shares. |
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Use of proceeds |
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The selling shareholders will receive all of the proceeds from
this offering and we will not receive any proceeds from the sale
of ordinary shares in this offering. See Use of
Proceeds. The selling shareholders include entities
affiliated with directors of our company. Certain entities
affiliated with Kohlberg Kravis Roberts & Co., or KKR,
certain entities affiliated with Silver Lake Partners, or Silver
Lake, Seletar Investments Pte. Ltd., or Seletar, and Geyser
Investment Pte Ltd., or Geyser, have filed as a group with the
Securities Exchange Commission, or SEC, with respect to their
collective ownership of our ordinary shares and are selling
shareholders in this offering. See Selling
Shareholders. |
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Nasdaq Global Select Market Symbol |
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AVGO |
The number of ordinary shares to be outstanding after the
offering is based on 243,427,133 ordinary shares outstanding as
of January 30, 2011, which excludes:
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11,606,650 ordinary shares issuable upon the exercise of options
outstanding under our Amended and Restated Equity Incentive Plan
for Executive Employees of Avago Technologies Limited and
Subsidiaries, or the Executive Plan, and Amended and Restated
Equity Incentive Plan for Senior Management Employees of Avago
Technologies Limited and Subsidiaries, or the Senior Management
Plan, as of January 30, 2011, at a weighted average
exercise price of $8.27 per share;
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8,166,801 ordinary shares issuable upon the exercise of options
outstanding under our 2009 Equity Incentive Award Plan as of
January 30, 2011, at a weighted average exercise price of
$18.35 per share, 66,666 ordinary shares issuable upon the
vesting of restricted share units outstanding under the 2009
Equity Incentive Award Plan, at a weighted average exercise
price equal to zero, and 11,624,493 ordinary shares reserved for
future issuance under our 2009 Equity Incentive Award Plan;
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307,948 ordinary shares issuable as at January 30, 2011
upon the exercise of an option granted to Capstone Equity
Investors LLC at an exercise price of $5.00 per share, all of
which were issued upon the exercise of the remaining portion of
such option by Capstone in February 2011; and
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up to 8,000,000 ordinary shares issuable pursuant to our
Employee Share Purchase Plan, or ESPP, of which 191,047 were
issued in March 2011.
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Except as otherwise indicated, all information in this
prospectus supplement assumes no exercise of the
underwriters option to purchase additional shares from the
selling shareholders.
S-3
RISK
FACTORS
Investing in our ordinary shares involves a high degree of
risk. You should carefully consider the risks described below,
as well as the other information included or incorporated by
reference in this prospectus supplement and the accompanying
prospectus before making an investment decision. Our business,
operations and financial results are subject to various risks
and uncertainties, including those described below, that could
adversely affect our business, financial condition, results of
operations, cash flows, and the trading price of our ordinary
shares. The following important factors, among others, could
cause our actual results to differ materially from those
expressed in forward-looking statements made by us or on our
behalf in filings with the Securities and Exchange Commission,
or SEC, press releases, communications with investors and oral
statements.
Risks
Related to Our Business
We
operate in the highly cyclical semiconductor industry, which is
subject to significant downturns.
The semiconductor industry is highly cyclical and is
characterized by constant and rapid technological change and
price erosion, evolving technical standards, short product life
cycles (for semiconductors and for the end-user products in
which they are used) and wide fluctuations in product supply and
demand. From time to time, these and other factors, together
with changes in general economic conditions, cause significant
upturns and downturns in the industry in general and in our
business in particular. For example, the global semiconductor
market experienced substantial declines in 2001 and 2009, in
each case beyond the declines experienced in the typical cycles
experienced by the semiconductor industry, due in large part to
deteriorating global economic conditions during those periods.
Periods of industry downturns, including the recent economic
downturn, have been characterized by diminished demand for
end-user products, high inventory levels and periods of
inventory adjustment, under-utilization of manufacturing
capacity, changes in revenue mix and accelerated erosion of
average selling prices, resulting in an adverse effect on our
business, financial condition and results of operations.
Furthermore, poor or worsening global economic conditions may
cause reductions in customer spending and could lead to the
insolvency of key suppliers resulting in product delays,
customer insolvencies, and also counterparty failures that may
negatively impact our treasury operations, all of which may
negatively affect our business, results of operations and
financial condition. We expect our business to continue to be
subject to cyclical downturns even when overall economic
conditions are relatively stable.
Our
operating results are subject to substantial quarterly and
annual fluctuations.
Our revenues and operating results have fluctuated in the past
and are likely to fluctuate in the future. These fluctuations
may occur on a quarterly and annual basis and are due to a
number of factors, many of which are beyond our control. These
factors include, among others:
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changes in end-user demand for the products manufactured and
sold by our customers;
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the timing of receipt, reduction or cancellation of significant
orders by customers;
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fluctuations in the levels of component inventories held by our
customers;
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the gain or loss of significant customers;
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market acceptance of our products and our customers
products;
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our ability to develop, introduce and market new products and
technologies on a timely basis;
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the timing and extent of product development costs;
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new product announcements and introductions by us or our
competitors;
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incurrence of research and development and related new product
expenditures;
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seasonality or cyclical fluctuations in our markets;
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currency fluctuations;
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utilization of our internal manufacturing facilities;
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S-4
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fluctuations in manufacturing yields;
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significant warranty claims, including those not covered by our
suppliers or our insurers;
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availability and cost of raw materials from our suppliers;
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changes in our product mix or customer mix;
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intellectual property disputes;
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loss of key personnel or the shortage of available skilled
workers;
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the effects of competitive pricing pressures, including
decreases in average selling prices of our products; and
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changes in our tax incentive arrangements or structure, which
may adversely affect our net tax expense in any quarter in which
such an event occurs.
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The foregoing factors are difficult to forecast, and these, as
well as other factors, could materially adversely affect our
quarterly or annual operating results. In addition, a
significant amount of our operating expenses are relatively
fixed in nature due to our significant sales, research and
development and internal manufacturing overhead costs. Any
failure to adjust spending quickly enough to compensate for a
revenue shortfall could magnify the adverse impact of such
revenue shortfall on our results of operations. As a result, we
believe that
quarter-to-quarter
comparisons of our revenue and operating results may not be
meaningful or a reliable indicator of our future performance. If
our operating results in one or more future quarters fail to
meet the expectations of securities analysts or investors, an
immediate and significant decline in the trading price of our
ordinary shares may occur.
If we
do not adapt to technological changes in the semiconductor
industry, we could lose customers or market share.
The semiconductor industry is subject to constant and rapid
changes in technology, frequent new product introductions, short
product life cycles, rapid product obsolescence and evolving
technical standards. Technological developments may reduce the
competitiveness of our products and require unbudgeted upgrades
that could be expensive and time consuming to implement. Our
products could become obsolete sooner than we expect because of
faster than anticipated, or unanticipated, changes in one or
more of the technologies related to our products. Furthermore,
we continually evaluate expenditures for research and
development and must choose among alternative technologies based
on our expectations of future market growth and other factors.
We may be unable to develop and introduce new or enhanced
products that satisfy customer requirements and achieve market
acceptance in a timely manner or at all, the technologies where
we have focused our research and development expenditures may
not become commercially successful, and we may be unable to
anticipate new industry standards and technological changes. We
also may not be able to respond successfully to new product
announcements and introductions by competitors. If we fail to
adapt successfully to technological changes or fail to obtain
access to important new technologies, we may be unable to retain
customers, attract new customers or sell new products to our
existing customers.
Dependence
on contract manufacturing and outsourcing other portions of our
supply chain may adversely affect our ability to bring products
to market and damage our reputation.
We operate a primarily outsourced manufacturing business model
that principally utilizes third-party foundry and assembly and
test capabilities. As a result, we are highly reliant on
third-party foundry wafer fabrication capacity, including sole
sourcing for many components or products. For certain of our
product families, substantially all of our revenue from those
products is derived from semiconductors fabricated by external
foundries such as Taiwan Semiconductor Manufacturing Company
Ltd. and WIN Semiconductor Corp. We also use third-party
contract manufacturers for a significant majority of our
assembly and test operations, including Amertron Incorporated,
the Hana Microelectronics Public Company Ltd. group of companies
and SAE Magnetics (HK) Ltd. The ability and willingness of our
contract manufacturers to perform is largely outside of our
control. If one or more of our contract manufacturers or other
outsourcers fails to perform its obligations in a timely manner
or at satisfactory quality levels, our ability to bring products
to market and our reputation could suffer. If one of our
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suppliers, particularly a single-source supplier, ceases to, or
is unable to, manufacture such a component or supply is
otherwise constrained, we may be forced to re-engineer a product
or we may fail to meet customer demand. In addition to
discontinuing parts, suppliers may also extend lead times, limit
supplies or increase prices due to capacity constraints or other
factors. For example, in the event that manufacturing capacity
is reduced or eliminated at one or more facilities, including as
a response by contract manufacturers to cycles in the
semiconductor industry or as a result of unanticipated events
such as the recent major earthquakes and tsunami in Japan,
manufacturing could be disrupted, we could have difficulties
fulfilling our customer orders, which could result in the
payment of significant damages by us to our customers, and our
net revenue could decline. In addition, if these third parties
on whom we are highly reliant fail to deliver quality products
and components on time and at reasonable prices, we could have
difficulties fulfilling our customer orders and our net revenue
could decline. In such events, our business, financial condition
and results of operations would be adversely affected. As a
result of the disaster in Japan, we are reviewing our supply
chain and may seek to qualify second sources for some components
and products. Qualifying such second sources may be a lengthy
and potentially costly process.
To the extent we rely on third-party manufacturing
relationships, we face the following risks:
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inability of our manufacturers to develop manufacturing methods
appropriate for our products and manufacturers lack of
sufficient capacity, or their unwillingness to devote adequate
capacity to produce our products;
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product and manufacturing costs that are higher than anticipated;
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reduced control over product reliability and delivery schedules;
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more complicated supply chains; and
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time, expense and uncertainty in identifying and qualifying
additional or replacement manufacturers.
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Much of our outsourcing takes place in developing countries, and
as a result may additionally be subject to geopolitical
uncertainty. See Our business, financial
condition and results of operations could be adversely affected
by the political and economic conditions of the countries in
which we conduct business and other factors related to our
international operations.
A
prolonged disruption of our manufacturing facilities or other
significant operations could have a material adverse effect on
our business, financial condition and results of
operations.
Although we operate using a primarily outsourced manufacturing
business model, we do rely on the manufacturing facilities we
own, in particular our fabrication facilities in
Fort Collins, Colorado and Singapore. We maintain our
internal fabrication facilities for products utilizing our
innovative materials and processes, to protect our intellectual
property and to develop the technology for manufacturing. A
prolonged disruption or material malfunction of, interruption in
or the loss of operations at one or more of our production
facilities, especially our Fort Collins and Singapore
facilities, or the failure to maintain our labor force at one or
more of these facilities, would limit our capacity to meet
customer demands and delay new product development until a
replacement facility and equipment, if necessary, were found.
The lease on our primary internal fabrication facility in
Singapore expires in 2015. If we are unable to renew this lease
on satisfactory terms, we would be required to locate suitable
replacement premises, with the goal of ensuring a smooth
transition between facilities on or prior to the expiration of
our current lease. However, the replacement of this, or any
other, manufacturing facility could take an extended amount of
time and significant expenditures on our part before
manufacturing operations could restart. While we would seek to
minimize any disruption to our operations and supply chain
associated with any such changes in manufacturing facilities, we
may experience delays and significant costs resulting from these
steps, which could have a material adverse effect on our
business, financial condition and results of operations.
We are also dependent on various information technology systems,
including, but not limited to, networks, applications, and
outsourced services. We continually enhance and implement new
systems and processes throughout our global operations. For
example, we are planning to upgrade our primary enterprise
resource planning, or ERP, system later this calendar year to
provide for greater depth and breadth of functionality. Problems
with transitioning to the upgraded system, or the failure of the
upgraded system to operate effectively, could disrupt
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our operations and materially and adversely affect our business,
financial condition, and results of operations by harming our
ability to accurately forecast sales demand, manage our supply
chain and production facilities, fulfill customer orders, and
report financial and management information on a timely and
accurate basis. In addition, due to the systemic internal
control features within ERP systems, we may experience
difficulties that could affect our internal control over
financial reporting, which could create a significant deficiency
or material weakness in our overall internal controls under
Section 404 of the Sarbanes-Oxley Act of 2002, or the
Sarbanes-Oxley Act.
Failure
to adjust our supply chain volume due to changing market
conditions or failure to accurately estimate our customers
demand could adversely affect our results of
operations.
We make significant decisions, including determining the levels
of business that we will seek and accept, production schedules,
levels of reliance on contract manufacturing and outsourcing,
personnel needs and other resource requirements, based on our
estimates of customer requirements. The short-term nature of
commitments by many of our customers and the possibility of
rapid changes in demand for their products reduces our ability
to accurately estimate future customer requirements. Our results
of operations could be harmed if we are unable to adjust our
supply chain volume to address market fluctuations, including
those caused by the seasonal or cyclical nature of the markets
in which we operate, or by other unanticipated events such as
the major earthquakes and tsunami that occurred in Japan in
March 2011. The sale of our products is dependent, to a large
degree, on customers whose industries are subject to seasonal or
cyclical trends in the demand for their products. For example,
the consumer electronics market is particularly volatile and is
subject to seasonality related to the holiday selling season,
making demand difficult to anticipate. A number of our suppliers
are located in Japan, and we believe that many of our customers
also depend on suppliers of their own located in Japan. While we
typically carry some additional inventory to meet the
fluctuating demands of our customers, any delays in product
delivery from Japanese suppliers may have an adverse effect on
our ability to deliver our products to our customers, which
could negatively impact our results of operations. In addition,
even if we do not experience any delays in delivery from our
Japanese suppliers, if our customers cannot timely source other
components or materials from their suppliers in Japan, they may
scale back their manufacturing, which would likely cause them to
cancel or scale back their orders from us, and this may, in
turn, adversely affect our results of operations.
On occasion, customers may require rapid increases in
production, which can challenge our resources and reduce
margins. During a market upturn, we may not be able to purchase
sufficient supplies or components, or secure sufficient contract
manufacturing capacity, to meet increasing product demand, which
could harm our reputation, prevent us from taking advantage of
opportunities and reduce revenue growth. In addition, some parts
are not readily available from alternate suppliers due to their
unique design or the length of time necessary for design work.
In order to secure components for the production of our
products, we may continue to enter into non-cancelable purchase
commitments with vendors or make advance payments to suppliers,
which could reduce our ability to adjust our inventory or
expense levels to declining market demands. Prior commitments of
this type have resulted in an excess of parts when demand for
our products has decreased. Downturns in the semiconductor
industry have in the past caused, and may in the future cause,
our customers to reduce significantly the amount of products
ordered from us. If demand for our products is less than we
expect, we may experience excess and obsolete inventories and be
forced to incur additional charges. Conversely, if OEMs order
more of our products in any particular quarter than are
ultimately required to satisfy end customer demand, inventories
at these OEMs may grow in such quarter, which could adversely
affect our product revenues in a subsequent quarter as such OEMs
would likely reduce future orders until their inventory levels
realign with end customer demand. In addition, because certain
of our sales, research and development and internal
manufacturing overhead expenses are relatively fixed, a
reduction in customer demand may decrease our gross margins and
operating income.
Unless
we and our suppliers continuously improve manufacturing
efficiency and quality, our financial performance could be
adversely affected.
Manufacturing semiconductors involves highly complex processes
that require advanced equipment. We and our suppliers, as well
as our competitors, continuously modify these processes in an
effort to improve yields and product performance. Defects or
other difficulties in the manufacturing process can reduce
yields and increase
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costs. Our manufacturing efficiency will be an important factor
in our future financial performance, and we may be unable to
maintain or increase our manufacturing efficiency to the same
extent as our competitors. For products that we outsource
manufacturing, our product yields and performance will be
subject to the manufacturing efficiencies of our third-party
suppliers.
From time to time, we and our suppliers have experienced
difficulty in beginning production at new facilities,
transferring production to other facilities, achieving and
maintaining a high level of process quality and effecting
transitions to new manufacturing processes, all of which have
caused us to suffer delays in product deliveries or reduced
yields. We and our suppliers may experience manufacturing
problems in achieving acceptable yields or experience product
delivery delays in the future as a result of, among other
things, capacity constraints, construction delays, transferring
production to other facilities (as we may be required to do with
our manufacturing facility in Singapore, in or prior to 2015),
upgrading or expanding existing facilities or changing our
process technologies, any of which could result in a loss of
future revenues. Our results of operations could be adversely
affected by any increase in costs related to increases in
production capacity if revenues do not increase proportionately.
Winning
business is subject to lengthy, competitive selection processes
that require us to incur significant expense. Even if we begin a
product design, a customer may decide to cancel or change its
product plans, which could cause us to generate no revenues from
a product and adversely affect our results of
operations.
We are focused on winning competitive bid selection processes,
known as design wins, to develop semiconductors for
use in our customers products. These selection processes
are typically lengthy and can require us to incur significant
design and development expenditures and dedicate scarce
engineering resources in pursuit of a single customer
opportunity. We may not win the competitive selection process
and may never generate any revenue despite incurring significant
design and development expenditures. These risks are exacerbated
by the fact that many of our products will likely have very
short life cycles. Failure to obtain a design win sometimes
prevents us from offering an entire generation of a product.
This can result in lost revenues and could weaken our position
in future competitive selection processes.
After winning a product design, we may experience delays in
generating revenue from our products as a result of the lengthy
development cycle typically required. In addition, a delay or
cancellation of a customers plans could materially and
adversely affect our financial results, as we may have incurred
significant expense in the design process and generated no
revenue. Finally, our customers failure to successfully
market and sell their products could reduce demand for our
products and materially adversely affect our business, financial
condition and results of operations.
We may
be subject to claims of infringement of third-party intellectual
property rights or demands that we license third-party
technology, which could result in significant expense and loss
of our intellectual property rights.
The semiconductor industry is characterized by companies holding
large numbers of patents, copyrights, trademarks and trade
secrets and by the vigorous pursuit, protection and enforcement
of intellectual property rights. From time to time, third
parties assert against us and our customers and distributors
their patent, copyright, trademark, trade secret and other
intellectual property rights to technologies that are important
to our business. For example, we are currently involved in a
dispute with TriQuint Semiconductor, Inc., or TriQuint, in
which, among other things, TriQuint is seeking a judgment that
one of our patents relating to RF filter technology used in our
wireless products is invalid and, if valid, that TriQuints
products do not infringe that patent, and is claiming that
certain of our wireless products infringe three of its patents.
Claims that our products or processes infringe or misappropriate
these rights, regardless of their merit or resolution, are
frequently costly and divert the efforts and attention of our
management and technical personnel. In addition, many of our
customer agreements and in some cases our asset sale agreements
require us to indemnify our customers or purchasers for
third-party intellectual property infringement claims, which
have required and may in the future require that we defend those
claims, and might require that we pay damages in the case of
adverse rulings. Claims of this sort could also harm our
relationships with our customers and might deter future
customers from
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doing business with us. We do not know whether we will prevail
in such proceedings given the complex technical issues and
inherent uncertainties in intellectual property litigation. If
any pending or future proceedings result in an adverse outcome,
we could be required to:
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cease the manufacture, use or sale of the infringing products,
processes or technology;
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pay substantial damages for past, present and future use of the
infringing technology;
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expend significant resources to develop non-infringing
technology;
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license technology from the third-party claiming infringement,
which license may not be available on commercially reasonable
terms, or at all;
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enter into cross-licenses with our competitors, which could
weaken our overall intellectual property portfolio;
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indemnify customers or distributors;
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pay substantial damages to our customers or end users to
discontinue use or replace infringing technology with
non-infringing technology; or
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relinquish intellectual property rights associated with one or
more of our patent claims, if such claims are held invalid or
otherwise unenforceable.
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Any of the foregoing results could have a material adverse
effect on our business, financial condition and results of
operations.
We
utilize a significant amount of intellectual property in our
business. If we are unable to protect our intellectual property,
our business could be adversely affected.
Our success depends in part upon our ability to protect our
intellectual property. To accomplish this, we rely on a
combination of intellectual property rights, including patents,
copyrights, trademarks, service marks, trade secrets and similar
intellectual property, as well as customary contractual
protections with our customers, suppliers, employees and
consultants, and through security measures to protect our trade
secrets. We may be required to spend significant resources to
monitor and protect our intellectual property rights and there
can be no assurance that, even with significant expenditures, we
will be able to protect our intellectual property rights. We are
unable to predict that:
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any of the patents and pending patent applications, trademarks,
copyrights, trade secrets, know-how or other intellectual
property rights that we presently employ in our business will
not lapse or be invalidated, circumvented, challenged, or, in
the case of third-party intellectual property rights, licensed
or
sub-licensed
to us, be licensed to others;
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our intellectual property rights will provide competitive
advantages to us;
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rights previously granted by third parties to intellectual
property rights licensed or assigned to us, including portfolio
cross-licenses, will not hamper our ability to assert our
intellectual property rights against potential competitors or
hinder the settlement of currently pending or future disputes;
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any of our pending or future patent, trademark or copyright
applications will be issued or have the coverage originally
sought; or
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our intellectual property rights will be enforced in certain
jurisdictions where competition may be intense or where legal
protection may be weak.
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In addition, our competitors or others may develop products or
technologies that are similar or superior to our products or
technologies, duplicate our products or technologies or design
around our protected technologies. Effective patent, trademark,
copyright and trade secret protection may be unavailable or more
limited in one or more relevant jurisdictions, relative to those
protections available in the United States, or may not be
applied for in one or more relevant jurisdictions. Moreover,
from time to time we pursue litigation to assert our
intellectual property rights, including, in some cases, against
third parties with whom we have ongoing relationships, such as
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customers and suppliers, and third parties may pursue litigation
against us. For example, we have filed suit against ST
Microelectronics N.V., or ST Microelectronics, in which we are
seeking a judgment that they have infringed five of our patents
relating to optical navigation devices, and they have
counter-filed against us alleging that certain of our optical
navigation devices infringe two of their patents, among other
things. An adverse decision in such types of legal action could
limit our ability to assert our intellectual property rights and
limit the value of our technology, including the loss of
opportunities to license our technology to others or to collect
royalty payments based upon successful protection and assertion
of our intellectual property against others. In addition, such
legal actions or adverse decisions could otherwise negatively
impact our business, financial condition and results of
operations.
From time to time we may need to obtain additional intellectual
property licenses or renew existing license agreements. We are
unable to predict whether these license agreements can be
obtained or renewed on acceptable terms or at all.
Competition
in our industry could prevent us from growing our revenue and
from raising prices to offset increases in costs.
The global semiconductor market is highly competitive. We
compete in different target markets to various degrees on the
basis of, among other things, quality, technical performance,
price, product features, product system compatibility,
system-level design capability, engineering expertise,
responsiveness to customers, new product innovation, product
availability, delivery timing and reliability, and customer
sales and technical support. Current and prospective customers
for our products evaluate our capabilities against the merits of
our direct competitors. Some of our competitors are well
established, have a more extensive product portfolio, have
substantially greater market share and manufacturing, financial,
research and development and marketing resources to pursue
development, engineering, manufacturing, marketing and
distribution of their products. In addition, many of our
competitors have longer independent operating histories, greater
presence in key markets, more comprehensive patent protection
and greater name recognition. We compete with integrated device
manufacturers, or IDMs, and fabless semiconductor companies as
well as the internal resources of large, integrated OEMs. Our
competitors range from large, international companies offering a
wide range of semiconductor products to smaller companies
specializing in narrow markets. We expect competition in the
markets in which we participate to continue to increase as
existing competitors improve or expand their product offerings.
In addition, companies not currently in direct competition with
us may introduce competing products in the future. Because our
products are often building block semiconductors providing
functions that in some cases can be integrated into more complex
integrated circuits, or ICs, we also face competition from
manufacturers of ICs, as well as customers that develop their
own IC products. The competitive landscape is changing as a
result of an increasing trend of consolidation within the
industry, as some of our competitors have merged with or been
acquired by other competitors while others have begun
collaborating with each other. We expect this consolidation
trend to continue.
Our ability to compete successfully depends on elements both
within and outside of our control, including industry and
general economic trends. During past periods of downturns in our
industry, competition in the markets in which we operate
intensified as manufacturers of semiconductors reduced prices in
order to combat production overcapacity and high inventory
levels. The actions of our competitors, particularly in the area
of pricing, can have a substantial adverse impact on our
revenues, and potentially on revenues in specific industry end
markets. In periods where the semiconductor industry experiences
significant declines, manufacturers in financial difficulties or
in bankruptcy may implement pricing structures designed to
ensure short-term market share and near-term survival, rather
than securing long-term viability. In addition, many of our
competitors have substantially greater financial and other
resources than us with which to withstand adverse economic or
market conditions and any associated pricing actions of other
market participants in the future.
We may
be unable to make the substantial and productive research and
development investments which are required to remain competitive
in our business.
The semiconductor industry requires substantial investment in
research and development in order to develop and bring to market
new and enhanced technologies and products. In order to remain
competitive, we anticipate that we will need to maintain or
increase our levels of research and development expenditures,
and we expect research and development expenses to increase in
absolute dollars for the foreseeable future, due to the
increasing
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complexity and number of products we plan to develop. We do not
know whether we will have sufficient resources to maintain or
increase the level of investment in research and development
required to remain competitive. In addition, we cannot assure
you that the technologies where we have focused our research and
development expenditures will become commercially successful. If
we are required to invest significantly greater resources than
anticipated in our research and development efforts without a
corresponding increase in revenue, our operating results could
decline.
Our
business would be adversely affected by the departure of
existing members of our senior management team or if our senior
management team is unable to effectively implement our
strategy.
Our success depends, in large part, on the continued
contributions of our senior management team, in particular, the
services of Mr. Hock E. Tan, our President and Chief
Executive Officer. None of our senior management is bound by
written employment contracts to remain with us for a specified
period. In addition, we do not currently maintain key person
life insurance covering our senior management. The loss of any
of our senior management could harm our ability to implement our
business strategy and respond to the rapidly changing market
conditions in which we operate.
If we
are unable to attract, train and retain qualified personnel,
especially our design and technical personnel, we may not be
able to execute our business strategy effectively.
Our future success depends on our ability to retain, attract and
motivate qualified personnel, including our management, sales
and marketing, legal and finance, and especially our design and
technical personnel. We do not know whether we will be able to
retain all of these employees as we continue to pursue our
business strategy. We have historically encountered difficulties
in hiring and retaining qualified engineers because there is a
limited pool of engineers with expertise in analog and
optoelectronic semiconductor design. Competition for such
personnel is intense in the semiconductor industry. As the
source of our technological and product innovations, our design
and technical personnel represent a significant asset. The loss
of the services of key employees, especially our key design and
technical personnel, or our inability to retain, attract and
motivate qualified design and technical personnel, could have a
material adverse effect on our business, financial condition and
results of operations.
We are
subject to warranty claims, product recalls and product
liability.
We are currently, and from time to time may be, subject to
warranty or product liability claims that have lead and may in
the future lead to significant expenses as we compensate
affected customers for costs incurred related to product quality
issues. For example, in the second quarter of 2009 we identified
a product quality issue with a particular component that we took
steps to correct, including notifying our customers and offering
to replace such components. We are continuing our discussions
with affected customers regarding this issue, and have
compensated or otherwise rectified the issue with many of those
customers. As at January 30, 2011, we had recorded an
aggregate of $17 million in charges associated with this
issue and may incur additional charges as we continue to work
with our customers to resolve the matter.
Although we maintain product liability insurance, such insurance
is subject to significant deductibles and there is no guarantee
that such insurance will be available or adequate to protect
against all such claims, or we may elect to self-insure with
respect to certain matters. We may incur costs and expenses in
the event of any recall of a customers product containing
one of our devices. The process of identifying a recalled
product in devices that have been widely distributed may be
lengthy and require significant resources, and we may incur
significant replacement costs, contract damage claims from our
customers and reputational harm. Our customer contracts
typically contain warranty and indemnification provisions, and
in certain cases liquidated damages, provisions, relating to
product quality issues. The potential liabilities associated
with such provisions are significant and, in some cases,
potentially unlimited, and may greatly exceed any revenues we
receive from such products. Costs, payments or damages incurred
or paid by us in connection with warranty and product liability
claims and product recalls could materially adversely affect our
financial condition and results of operations.
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The
complexity of our products could result in unforeseen delays or
expenses or undetected defects or bugs, which could adversely
affect the market acceptance of new products, damage our
reputation with current or prospective customers, and materially
and adversely affect our operating costs.
Highly complex products such as the products that we offer, may
contain defects and bugs when they are first introduced or as
new versions are released, or their release may be delayed due
to unforeseen difficulties during product development. We have
in the past experienced, and may in the future experience, these
defects, bugs and delays. If any of our products contain defects
or bugs, or have reliability, quality or compatibility problems,
we may not be able to successfully design workarounds.
Consequently, our reputation may be damaged and customers may be
reluctant to buy our products, which could materially and
adversely affect our ability to retain existing customers,
attract new customers, and our financial results. In addition,
these defects or bugs could interrupt or delay sales to our
customers. To resolve these problems, we may have to invest
significant capital and other resources. Although our products
are tested by our suppliers, our customers and ourselves, it is
possible that our new products will contain defects or bugs. If
any of these problems are not found until after we have
commenced commercial production of a new product, we may be
required to incur additional development costs and product
recall, repair or replacement costs. These problems may also
result in claims against us by our customers or others. For
example, if a delay in the manufacture and delivery of our
products causes the delay of a customers product delivery,
we may be required, under the terms of our agreement with that
customer, to compensate the customer for the adverse effects of
such delays. In addition, these problems may divert our
technical and other resources from other development efforts,
and we would likely lose, or experience a delay in, market
acceptance of the affected product or products, and we could
lose credibility with our current and prospective customers. As
a result, our financial results could be materially and
adversely affected.
We are
subject to currency exchange risks that could adversely affect
our operations.
Although a majority of our revenue and operating expenses is
denominated in U.S. dollars, and we prepare our financial
statements in U.S. dollars in accordance with generally
accepted accounting principles, or GAAP, a portion of our
revenue and operating expenses is in foreign currencies. As a
result, we are subject to currency risks that could adversely
affect our operations, including:
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risks resulting from changes in currency exchange rates and the
implementation of exchange controls; and
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limitations on our ability to reinvest earnings from operations
in one country to fund the capital needs of our operations in
other countries.
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Changes in exchange rates will result in increases or decreases
in our costs and earnings, and may also affect the book value of
our assets located outside the United States and the amount of
our equity. Although we seek to minimize our currency exposure
by engaging in hedging transactions where we deem it
appropriate, we do not know whether our efforts will be
successful.
Our
operating results and financial condition could be harmed if the
markets into which we sell our products decline.
Visibility into our markets is limited. As was the case in the
recent economic downturn, any decline in our customers
markets would likely result in a reduction in demand for our
products and make it more difficult to collect on outstanding
amounts due to us. For example, if the Asian market does not
continue to grow as anticipated or if the semiconductor market
declines, our results of operations will likely suffer. In such
an environment, pricing pressures could intensify and, if we
were unable to respond quickly, could significantly reduce our
gross margins. To the extent we cannot offset recessionary
periods or periods of reduced growth that may occur in these
markets through increased market share or otherwise, our net
revenue may decline and our business, financial condition and
results of operations may suffer. Pricing pressures and
competition are especially intense in semiconductor-related
industries, which could prevent achievement of our long-term
financial goals and could require us to implement additional
cost-cutting measures. Furthermore, industry growth rates may
not be as forecasted, which could result in us spending on
process and product development well ahead of market
requirements, which in turn could have a material adverse effect
on our business, financial condition and results of operations.
S-12
The
demands or loss of one or more of our significant customers may
adversely affect our business.
Some of our customers are material to our business and results
of operations. During fiscal year 2010, no customer accounted
for 10% or more of our net revenue, but our top 10 customers,
which included five distributors, collectively accounted for 55%
of our net revenue. During the first quarter of fiscal year
2011, no customer accounted for 10% or more of our net revenue,
but our top 10 customers, which included three distributors,
collectively accounted for 52% of our net revenue. We believe
our top customers purchasing power has given them the
ability to make greater demands on their suppliers, including
us. We expect this trend to continue, which we expect will
result in our results of operations becoming increasingly
sensitive to deterioration in the financial condition of, or
other adverse developments related to, one or more of our
significant customers. Although we believe that our
relationships with our major customers are good, we generally do
not have long-term contracts with any of them, which is typical
of our industry. As a result, although our customers provide
indications of their product needs and purchases on an annual
basis, they generally purchase our products on a weekly or daily
basis and the relationship, as well as particular orders, can be
terminated at any time. We are in the process of changing our
relationship with one of our global, full-line distributors to
make it a regional, full-line distributor, as we believe that
the needs of our customers will be better served by having fewer
global distributors. We believe that our existing sales channels
will be able to absorb any sales that we would otherwise have
been made to this distributor, however, if we are unable to
supply sufficient product to remaining distributors,
end-customers may elect to buy competitors products. In
addition, certain end-customers may be reluctant to change
suppliers, which may induce them to purchase our
competitors products from their current distributor. The
loss of any of our major customers, or any substantial reduction
in sales to any of these customers, could have a material
adverse effect on our business, financial condition and results
of operations.
We
generally do not have any long-term supply contracts with our
contract manufacturers or materials suppliers and may not be
able to obtain the products or raw materials required for our
business, which could have a material adverse affect on our
business.
We either obtain the products we need for our business from
third-party contract manufacturers or we obtain the materials we
need for our products from suppliers, some of which are our
single source suppliers for these materials. We purchase a
significant portion of our semiconductor materials and finished
goods from a few suppliers and contract manufacturers. For
fiscal year 2010, we purchased 54% of the materials for our
manufacturing processes from eight suppliers. For the first
quarter of fiscal year 2011, we purchased 55% of the materials
for our manufacturing processes from seven suppliers.
Substantially all of our purchases are on a purchase order
basis, and we have not generally entered into long-term
contracts with our contract manufacturers or suppliers. In the
event that these purchase orders or relationships with suppliers
are terminated, we cannot obtain sufficient quantities of raw
materials at reasonable prices, the quality of the material
deteriorates, we fail to satisfy our customers
requirements or we are not able to pass on higher materials or
energy costs to our customers, our business, financial condition
and results of operations could be adversely impacted.
Our manufacturing processes rely on many materials, including
silicon and GaAs wafers, copper lead frames, precious metals,
mold compound, ceramic packages and various chemicals and gases.
From time to time, suppliers may extend lead times, limit
supplies or increase prices due to commodity price increases,
capacity constraints or other factors. Although we believe that
our current supplies of materials are adequate, shortages could
occur in various essential materials due to interruption of
supply or increased demand in the industry.
We use third-party contractor manufacturers for most of our
manufacturing activities, primarily for wafer fabrication and
module assembly and test services. Our agreements with these
manufacturers typically require us to forecast product needs,
commit to purchase services consistent with these forecasts and
may require other commitments in the early stages of the
relationship. Our operations could be adversely affected in the
event that these contractual relationships were disrupted or
terminated, the cost of such services increased significantly,
the quality of the services provided deteriorated, our forecasts
proved to be materially incorrect or capacity is consumed by our
competitors.
S-13
We
rely on third parties to provide corporate infrastructure
services necessary for the operation of our business. Any
failure of one or more of our vendors to provide these services
could have a material adverse effect on our
business.
We rely on third-party vendors to provide critical corporate
infrastructure services, including, among other things, certain
services related to accounting, billing, human resources,
information technology, or IT, network development and network
monitoring. We depend on these vendors to ensure that our
corporate infrastructure will consistently meet our business
requirements. The ability of these third-party vendors to
successfully provide reliable, high quality services is subject
to technical and operational uncertainties that are beyond our
control. While we may be entitled to damages if our vendors fail
to perform under their agreements with us, our agreements with
these vendors limit the amount of damages we may receive. In
addition, we do not know whether we will be able to collect on
any award of damages or that any such damages would be
sufficient to cover the actual costs we would incur as a result
of any vendors failure to perform under its agreement with
us. Any failure of our corporate infrastructure could have a
material adverse effect on our business, financial condition and
results of operations. Upon expiration or termination of any of
our agreements with third-party vendors, we may not be able to
replace the services provided to us in a timely manner or on
terms and conditions, including service levels and cost, that
are favorable to us and a transition from one vendor to another
vendor could subject us to operational delays and inefficiencies
until the transition is complete.
Our
gross margin is dependent on a number of factors, including our
product mix and level of capacity utilization.
Our gross margin is highly dependent on product mix, with
proprietary products and products sold into our industrial and
automotive target market typically providing higher gross margin
than other products. A shift in sales mix away from our higher
margin products could adversely affect our future gross margin
percentages. Our margin may also be affected by fluctuations in
commodity prices, either directly in the price of the raw
materials we buy, or as a result of prices increases passed on
to us by our suppliers. Many commodities prices, including those
of gold and fuel, have risen significantly in recent months. We
do not hedge our exposure to commodity prices and continued
increases in commodities prices may adversely affect our gross
margin.
In addition, semiconductor manufacturing requires significant
capital investment, leading to high fixed costs, including
depreciation expense. Although we outsource a significant
portion of our manufacturing activities, we do retain some
semiconductor fabrication facilities. If we are unable to
utilize our owned fabrication facilities at a high level, the
fixed costs associated with these facilities will not be fully
absorbed, resulting in higher average unit costs and lower gross
margins. In the past, we have experienced periods where our
gross margins declined due to, among other things, reduced
factory utilization resulting from reduced customer demand,
reduced selling prices and a change in product mix towards lower
margin devices. Increased competition and the existence of
product alternatives, more complex engineering requirements,
lower demand and other factors may lead to further price
erosion, lower revenues and lower margins for us in the future.
Our
business, financial condition and results of operations could be
adversely affected by the political and economic conditions of
the countries in which we conduct business and other factors
related to our international operations.
We sell our products throughout the world. In addition, as at
January 30, 2011, approximately 67% of our employees are
located outside of the United States. Multiple factors relating
to our international operations and to particular countries in
which we operate could have a material adverse effect on our
business, financial condition and results of operations. These
factors include:
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changes in political, regulatory, legal or economic conditions;
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restrictive governmental actions, such as restrictions on the
transfer or repatriation of funds and foreign investments and
trade protection measures, including export duties and quotas
and customs duties and tariffs;
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disruptions of capital and trading markets;
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S-14
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changes in import or export licensing requirements;
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transportation delays;
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civil disturbances or political instability;
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geopolitical turmoil, including terrorism, war or political or
military coups;
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changes in labor standards;
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limitations on our ability under local laws to protect our
intellectual property;
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nationalization of businesses and expropriation of assets;
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changes in tax laws;
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currency fluctuations, which may result in our products becoming
too expensive for foreign customers or foreign-sourced materials
and services becoming more expensive for us; and
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difficulty in obtaining distribution and support.
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A significant legal risk associated with conducting business
internationally is compliance with various and differing
anti-corruption and anti-bribery laws and regulations of the
countries in which we do business, including the
U.S. Foreign Corrupt Practices Act, the recent U.K. Bribery
Act and similar laws in China. In addition, the anti-corruption
laws in various countries are constantly evolving and may, in
some cases, conflict with each other. Our Code of Ethics and
Business Conduct prohibit us and our employees from offering or
giving anything of value to a government official for the
purpose of obtaining or retaining business and from engaging in
unethical business practices. However, there can be no assurance
that all of our employees or agents will refrain from acting in
violation of this and our related anti-corruption policies and
procedures. Any such violation could have a material adverse
effect on our business.
A majority of our products are produced and sourced in Asia,
including in China, Malaysia, the Philippines, Singapore, Taiwan
and Thailand. Any conflict or uncertainty in these countries,
including due to political or civil unrest or public health or
safety concerns, could have a material adverse effect on our
business, financial condition and results of operations. In
addition, if the government of any country in which our products
are manufactured or sold sets technical standards for products
manufactured in or imported into their country that are not
widely shared, it may lead certain of our customers to suspend
imports of their products into that country, require
manufacturers in that country to manufacture products with
different technical standards and disrupt cross-border
manufacturing relationships which, in each case, could have a
material adverse effect on our business, financial condition and
results of operations.
In addition, our subsidiaries may require future equity-related
financing, and any capital contributions to certain of our
subsidiaries may require the approval of the relevant
authorities in the jurisdiction in which the subsidiary is
incorporated. The approvals are required from the investment
commissions or similar agency of the particular jurisdiction and
relate to any initial or additional equity investment by foreign
entities in local corporations. Our failure to obtain the
required approvals and our resulting inability to provide such
equity- related financing or capital contributions could have an
adverse effect on our business, financial condition and results
of operations.
If we
suffer loss or significant damage to our factories, facilities
or distribution system due to catastrophe, our operations could
be seriously harmed.
Our factories, facilities and distribution system, and those of
our contract manufacturers, are subject to risk of catastrophic
loss due to fire, flood, or other natural or man-made disasters.
The majority of our facilities and those of our contract
manufacturers are located in the Pacific Rim region, a region
with above average seismic and severe weather activity. In
addition, our research and development personnel are
concentrated in a few locations, primarily Korea, Malaysia,
Singapore, Fort Collins, Colorado and San Jose,
California, with the expertise of the personnel at each such
location tending to be focused on one or two specific areas. Any
catastrophic natural disaster in those regions or catastrophic
loss or significant damage to any of our facilities in those
regions would likely disrupt our
S-15
operations, delay production, shipments and revenue and result
in significant expenses to repair or replace the facility, and
in some instances could significantly curtail our research and
development efforts in a particular product area or target
market. For example, we have a small manufacturing facility in
Japan, which suffered minor damage as a result of the recent
natural disaster in Japan and was shut down for several days due
to the severe disruption to Japans infrastructure and
rolling power outages caused by the disaster. In addition, any
catastrophic loss at our Fort Collins, Colorado,
San Jose, California or Singapore facilities would
materially and adversely affect our business.
If the
tax incentive or tax holiday arrangements we have negotiated in
Singapore and other jurisdictions change or cease to be in
effect or applicable, or if our assumptions and interpretations
regarding tax laws and incentive or holiday arrangements prove
to be incorrect, the amount of corporate income taxes we have to
pay could significantly increase.
We have structured our operations to maximize the benefit from
various tax incentives and tax holidays extended to us in
various jurisdictions to encourage investment or employment. For
example, we have obtained several tax incentives from the
Singapore Economic Development Board, an agency of the
Government of Singapore, which provide that certain classes of
income we earn in Singapore are subject to tax holidays or
reduced rates of Singapore income tax. Each such tax incentive
is separate and distinct from the others, and may be granted,
withheld, extended, modified, truncated, complied with or
terminated independently without any effect on the other
incentives. In order to retain these tax benefits in Singapore,
we must meet certain operating conditions specific to each
incentive relating to, among other things, maintenance of a
treasury function, a corporate headquarters function, specified
intellectual property activities and specified manufacturing
activities in Singapore. Some of these operating conditions are
subject to phase-in periods through 2015. The Singapore tax
incentives are presently scheduled to expire at various dates
generally between 2014 and 2025. Absent such tax incentives, the
corporate income tax rate in Singapore that would otherwise
apply to us would be 17% commencing from the 2010 year of
assessment. For the fiscal years ended November 1, 2009 and
October 31, 2010, the effect of all these tax incentives,
in the aggregate, was to reduce the overall provision for income
taxes from what it otherwise would have been in such year by
approximately $17 million and $63 million,
respectively. The tax incentives that we have negotiated in
other jurisdictions are also subject to our compliance with
various operating and other conditions. If we cannot or elect
not to comply with the operating conditions included in any
particular tax incentive, we will lose the related tax benefits
and could be required to refund material tax benefits previously
realized by us with respect to that incentive and, depending on
the incentive at issue, could likely be required to modify our
operational structure and tax strategy. Any such modified
structure or strategy may not be as beneficial to us from an
income tax expense or operational perspective as the benefits
provided under the present tax concession arrangements.
Our interpretations and conclusions regarding the tax incentives
are not binding on any taxing authority, and if our assumptions
about tax and other laws are incorrect or if these tax
incentives are substantially modified or rescinded we could
suffer material adverse tax and other financial consequences,
which would increase our expenses, reduce our profitability and
adversely affect our cash flows. In addition, taxable income in
any jurisdiction is dependent upon acceptance of our operational
practices and intercompany transfer pricing by local tax
authorities as being on an arms length basis. Due to
inconsistencies in application of the arms length standard
among taxing authorities, as well as lack of adequate
treaty-based protection, transfer pricing challenges by tax
authorities could, if successful, substantially increase our
income tax expense. We are subject to, and are under, audit in
various jurisdictions, and such jurisdictions may assess
additional income tax against us. Although we believe our tax
positions are reasonable, the final determination of tax audits
could be materially different from our recorded income tax
provisions and accruals. The ultimate results of an audit could
have a material adverse effect on our operating results or cash
flows in the period or periods for which that determination is
made.
The
enactment of legislation implementing changes in U.S. taxation
of international business activities or the adoption of other
tax reform policies could materially impact our financial
position and results of operations.
Tax bills are introduced from time to time to reform
U.S. taxation of international business activities.
Depending on the final form of legislation enacted, if any,
these consequences may be significant for us due to the
S-16
large scale of our international business activities. If any of
these proposals are enacted into legislation, they could have
material adverse consequences on the amount of tax we pay and
thereby on our financial position and results of operations.
We may
pursue acquisitions, dispositions, investments and joint
ventures, which could affect our results of
operations.
We have made and expect to continue to make acquisitions of, and
investments in, businesses that offer complementary products,
services and technologies, augment our market coverage, or
enhance our technological capabilities. We may also enter into
strategic alliances or joint ventures to achieve these goals. We
cannot assure you that we will be able to identify suitable
acquisition, investment, alliance, or joint venture
opportunities or that we will be able to consummate any such
transactions or relationships on terms and conditions acceptable
to us, or that such transactions or relationships will be
successful.
These transactions or any other acquisitions or dispositions
involve risks and uncertainties. For example, the integration of
acquired businesses may not be successful and could result in
disruption to other parts of our business. In addition, the
integration may require that we incur significant restructuring
charges. To integrate acquired businesses, we must implement our
management information systems, operating systems and internal
controls, and assimilate and manage the personnel of the
acquired operations. The difficulties of these integrations may
be further complicated by such factors as the size of the
business or entity acquired, geographic distances, lack of
experience operating in the geographic market or industry sector
of the acquired business, delays and challenges associated with
integrating the business with our existing businesses, diversion
of managements attention from daily operations of the
business, potential loss of key employees and customers of the
acquired business, the potential for deficiencies in internal
controls at the acquired or combined business, performance
problems with the acquired business technology,
difficulties in entering markets in which we have no or limited
direct prior experience, exposure to unanticipated liabilities
of the acquired business, insufficient revenues to offset
increased expenses associated with the acquisition, and our
potential inability to achieve the growth prospects and
synergies expected from any such acquisition. Even when an
acquired business has already developed and marketed products,
there can be no assurance that product enhancements will be made
in a timely fashion or that all pre-acquisition due diligence
will have identified all material issues that might arise with
respect to such acquired assets.
Any acquisition may also cause us to assume liabilities, acquire
goodwill and
non-amortizable
intangible assets that will be subject to impairment testing and
potential impairment charges, incur amortization expense related
to certain intangible assets, increase our expenses and working
capital requirements, and subject us to litigation, which would
reduce our return on invested capital. Failure to manage and
successfully integrate the acquisitions we make could materially
harm our business and operating results.
Any future acquisitions may require additional debt or equity
financing, which, in the case of debt financing, would increase
our leverage and potentially affect our credit ratings, and in
the case of equity financing, would be dilutive to our existing
shareholders. Any downgrades in our credit ratings associated
with an acquisition could adversely affect our ability to borrow
by resulting in more restrictive borrowing terms. As a result of
the foregoing, we also may not be able to complete acquisitions
or strategic customer transactions in the future to the same
extent as in the past, or at all. These and other factors could
harm our ability to achieve anticipated levels of profitability
at acquired operations or realize other anticipated benefits of
an acquisition, and could adversely affect our business,
financial condition and results of operations.
Our
business is subject to various governmental regulations, and
compliance with these regulations may cause us to incur
significant expenses. If we fail to maintain compliance with
applicable regulations, we may be forced to recall products and
cease their manufacture and distribution, and we could be
subject to civil or criminal penalties.
Our business is subject to various significant international and
U.S. laws and other legal requirements, including
packaging, product content, labor and import/export regulations.
These regulations are complex, change frequently and have
generally become more stringent over time. We may be required to
incur significant expenses to comply with these regulations or
to remedy violations of these regulations. Any failure by us to
comply with
S-17
applicable government regulations could result in cessation of
our operations or portions of our operations, product recalls or
impositions of fines and restrictions on our ability to conduct
our operations. In addition, because many of our products are
regulated or sold into regulated industries, we must comply with
additional regulations in marketing our products.
Our products and operations are also subject to the rules of
industrial standards bodies, like the International Standards
Organization, as well as regulation by other agencies, such as
the U.S. Federal Communications Commission. If we fail to
adequately address any of these rules or regulations, our
business could be harmed.
We must conform the manufacture and distribution of our
semiconductors to various laws and adapt to regulatory
requirements in all countries as these requirements change. If
we fail to comply with these requirements in the manufacture or
distribution of our products, we could be required to pay civil
penalties, face criminal prosecution and, in some cases, be
prohibited from distributing our products commercially until the
products or component substances are brought into compliance.
We are
subject to environmental, health and safety laws, which could
increase our costs, restrict our operations and require
expenditures that could have a material adverse affect on our
results of operations and financial condition.
We are subject to a variety of international and U.S. laws
and other legal requirements relating to the use, disposal,
clean-up of
and human exposure to, hazardous materials. Any failure by us to
comply with environmental, health and safety requirements could
result in the limitation or suspension of production or subject
us to future liabilities in excess of our reserves. In addition,
compliance with environmental, health and safety requirements
could restrict our ability to expand our facilities or require
us to acquire costly pollution control equipment, incur other
significant expenses or modify our manufacturing processes. In
the event of the discovery of new contamination, additional
requirements with respect to existing contamination, or the
imposition of other cleanup obligations for which we are
responsible, we may be required to take remedial or other
measures which could have a material adverse effect on our
business, financial condition and results of operations.
We also face increasing complexity in our product design and
procurement operations as we adjust to new requirements relating
to the materials composition of our products, including the
restrictions on lead and certain other substances in electronics
that apply to specified electronics products sold in the
European Union as of July 1, 2006 under the
Restriction of Hazardous Substances in Electrical and Electronic
Equipment Directive. Other countries, such as the United States,
China and Japan, have enacted or may enact laws or regulations
similar to the EU legislation. Other environmental regulations
may require us to reengineer our products to utilize components
that are more environmentally compatible. Such reengineering and
component substitution may result in excess inventory or other
additional costs and could have a material adverse effect on our
results of operations.
In addition to the costs of complying with environmental, health
and safety requirements, we may in the future incur costs
defending against environmental litigation brought by government
agencies and private parties. We may be defendants in lawsuits
brought by parties in the future alleging environmental damage,
personal injury or property damage. A significant judgment
against us could harm our business, financial condition and
results of operations.
In the last few years, there has been increased media scrutiny
and associated reports focusing on a potential link between
working in semiconductor manufacturing clean room environments
and certain illnesses, primarily different types of cancers.
Regulatory agencies and industry associations have begun to
study the issue to see if any actual correlation exists. Because
we utilize clean rooms, we may become subject to liability
claims. In addition, these reports may also affect our ability
to recruit and retain employees.
We cannot predict:
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changes in environmental or health and safety laws or
regulations;
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the manner in which environmental or health and safety laws or
regulations will be enforced, administered or interpreted;
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S-18
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our ability to enforce and collect under indemnity agreements
and insurance policies relating to environmental
liabilities; or
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the cost of compliance with future environmental or health and
safety laws or regulations or the costs associated with any
future environmental claims, including the cost of
clean-up of
currently unknown environmental conditions.
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We
have taken significant restructuring charges in the past and may
need to take material restructuring charges in the
future.
During fiscal year 2009, we pursued a number of restructuring
initiatives designed to reduce costs and increase revenue across
our operations, in large part due to the global economic
downturn and related decline in demand for our customers
products. These initiatives included significant workforce
reductions in certain areas as we realigned our business,
establishing certain operations closer in location to our global
customers, evaluating functions more efficiently performed
through partnerships or other outside relationships and steps to
attempt to further reduce our overhead costs. As a result of
these initiatives, we incurred restructuring charges of
$34 million in fiscal year 2009 and $4 million in
fiscal year 2010.
We may be required to take additional charges in the future as
we continue to evaluate our operations and cost structures
relative to general economic conditions, market demands, cost
competitiveness, and our geographic footprint as it relates to
our customers production requirements. We cannot assure
you as to the timing or amount of any future restructuring
charges. If we are required to take additional restructuring
charges in the future, our operating results, financial
condition, and cash flows may be adversely impacted.
Additionally, there are other potential risks associated with
our restructurings that could adversely affect us, such as
delays encountered with the finalization and implementation of
the restructuring activities, work stoppages, and the failure to
achieve targeted cost savings.
We are
subject to risks associated with our distributors product
inventories and product sell-through.
We sell many of our products to customers through distributors
who maintain their own inventory of our products for sale to
dealers and end users. We recognize revenues for sales to
distributors upon delivery to the distributor. We limit
distributor return rights and we allow limited price adjustments
on sales to distributors. We provide reserves for distributor
rights related to these limited stock returns and price
adjustments. Sales to distributors accounted for 41% and 38% of
our net revenue for fiscal year 2010 and the first quarter of
fiscal year 2011, respectively.
If these distributors are unable to sell an adequate amount of
their inventory of our products in a given quarter to dealers
and end users or if they decide to decrease their inventories
for any reason, such as due to the recent global recession or
due to any downturn in technology spending, our sales to these
distributors and our revenues may decline. In addition, if
distributors decide to purchase more inventory in any particular
quarter, due to product availability or other reasons, than is
required to satisfy end customer demand, inventory at our
distributors may grow in such quarter, which could adversely
affect our product revenues in a subsequent quarter as such
distributors will likely reduce future orders until their
inventory levels realign with end customer demand.
We also face the risk that our distributors may for other
reasons have inventory levels of our products in excess of
future anticipated sales. If such sales do not occur in the time
frame anticipated by these distributors for any reason, these
distributors may substantially decrease the amount of product
they order from us in subsequent periods, which would harm our
business.
Our reserve estimates associated with products stocked by our
distributors are based largely on reports that our distributors
provide to us on a monthly basis. To date, we believe this data
has been generally accurate. To the extent that this resale and
channel inventory data is inaccurate or not received in a timely
manner, we may not be able to make reserve estimates for future
periods accurately or at all.
S-19
We
rely on third-party distributors and manufacturers
representatives, as well as our employee sales representatives,
and the failure of these distributors or representatives to
perform as expected could reduce our future sales.
We sell many of our products to customers through distributors
and manufacturers representatives, as well as through our
employee sales representatives. We are unable to predict the
extent to which our distributors and manufacturers
representatives will be successful in marketing and selling our
products. Moreover, many of our distributors and
manufacturers representatives and distributors also market
and sell competing products. Our relationships with our
representatives and distributors may be terminated by either
party at any time. As part of a change in strategy, in order to
more effectively manage sales representatives performance, in
2010, we terminated our relationships with a substantial number
of our manufacturing representatives in the United States and
have replaced them with additional employee representatives. In
addition, in May 2011, we began the process of reducing the
number of our global, full-line distributors by changing one of
them to a regional, full-line distributor. We continue to
evaluate our sales and distribution strategies and may make
further changes in the future. Our future performance will
depend, in part, on our ability to attract additional
distributors or manufacturers representatives that will be
able to market and support our products effectively, especially
in markets in which we have not previously distributed our
products, and on our ability to effectively manage distribution
efforts by our remaining global, full-line distributors. If we
cannot retain our current distributors or manufacturers
representatives, recruit additional or replacement distributors
or manufacturers representatives, or effectively manage
changes to our sales and distribution strategies, our sales and
operating results will be harmed.
The
average selling prices of products in our markets have
historically decreased rapidly and will likely do so in the
future, which could harm our revenues and gross
profits.
The products we develop and sell are used for high volume
applications. As a result, the prices of those products have
historically decreased rapidly. Gross profits on our products
may be negatively affected by, among other things, pricing
pressures from our customers, and the proportion of sales of our
wireless and other products into consumer application markets,
which are highly competitive and cost sensitive. In the past, we
have reduced the average selling prices of our products in
anticipation of future competitive pricing pressures, new
product introductions by us or our competitors and other
factors. Our gross profits and financial results will suffer if
we are unable to offset any reductions in our average selling
prices by increasing our sales volumes, reducing manufacturing
costs, or developing new and higher value-added products on a
timely basis.
We are
required to assess our internal control over financial reporting
on an annual basis and any adverse findings from such assessment
could result in a loss of investor confidence in our financial
reports, significant expenses to remediate any internal control
deficiencies and ultimately have an adverse effect on our share
price.
We are required to assess the effectiveness of our internal
control over financial reporting annually, as required by
Section 404 of the Sarbanes-Oxley Act. Even though, as at
October 31, 2010, we concluded that our internal control
over financial reporting was effective, we need to maintain our
processes and systems and adapt them as our business grows and
changes. This continuous process of maintaining and adapting our
internal controls and complying with Section 404 is expensive,
time-consuming and requires significant management attention. We
cannot be certain that our internal control measures will
continue to provide adequate control over our financial
processes and reporting and ensure compliance with
Section 404. Furthermore, as we grow our business or
acquire other businesses, our internal controls may become more
complex and we may require significantly more resources to
ensure they remain effective. Failure to implement required new
or improved controls, or difficulties encountered in their
implementation, either in our existing business or in businesses
that we may acquire, could harm our operating results or cause
us to fail to meet our reporting obligations. If we or our
independent registered public accounting firm identify material
weaknesses in our internal controls, the disclosure of that
fact, even if quickly remedied, may cause investors to lose
confidence in our financial statements and the trading price of
our ordinary shares may decline.
Remediation of a material weakness could require us to incur
significant expense and if we fail to remedy any material
weakness, our financial statements may be inaccurate, our
ability to report our financial results on a timely
S-20
and accurate basis may be adversely affected, our access to the
capital markets may be restricted, the trading price of our
ordinary shares may decline, and we may be subject to sanctions
or investigation by regulatory authorities, including the SEC or
The Nasdaq Global Select Market. We may also be required to
restate our financial statements from prior periods.
A
breach of our security systems may have a material adverse
effect on our business.
Our security systems are designed to maintain the physical
security of our facilities and protect our customers,
suppliers and employees confidential information.
Despite such efforts, we are subject to breach of security
systems which may result in unauthorized access to our
facilities
and/or the
information we are trying to protect. If unauthorized parties
gain physical access to one of our facilities or electronic
access to our information systems or such information is
misdirected, lost or stolen during transmission or transport,
any theft or misuse of such information could result in, among
other things, unfavorable publicity, difficulty in marketing our
products, allegations by our customers that we have not
performed our contractual obligations, litigation by affected
parties and possible financial obligations for damages related
to the theft or misuse of such information, any of which could
have a material adverse effect on our business, profitability
and financial condition.
Risks
Relating to Investments in Singapore Companies
It may
be difficult to enforce a judgment of U.S. courts for civil
liabilities under U.S. federal securities laws against us, our
directors or officers in Singapore.
We are incorporated under the laws of the Republic of Singapore,
and certain of our officers and directors are residents outside
the United States. Moreover, a majority of our consolidated
assets are located outside the United States. Although we
are incorporated outside the United States, we have agreed to
accept service of process in the United States through our agent
designated for that purpose. Nevertheless, since a majority of
the consolidated assets owned by us are located outside the
United States, any judgment obtained in the United States
against us may not be collectible within the United States.
There is no treaty between the United States and Singapore
providing for the reciprocal recognition and enforcement of
judgments in civil and commercial matters and a final judgment
for the payment of money rendered by any federal or state court
in the United States based on civil liability, whether or not
predicated solely upon the federal securities laws, would,
therefore, not be automatically enforceable in Singapore. There
is doubt whether a Singapore court may impose civil liability on
us or our directors and officers who reside in Singapore in a
suit brought in the Singapore courts against us or such persons
with respect to a violation solely of the federal securities
laws of the United States, unless the facts surrounding such a
violation would constitute or give rise to a cause of action
under Singapore law. Consequently, it may be difficult for
investors to enforce against us, our directors or our officers
in Singapore judgments obtained in the United States which are
predicated upon the civil liability provisions of the federal
securities laws of the United States.
We are
incorporated in Singapore and our shareholders may have more
difficulty in protecting their interest than they would as
shareholders of a corporation incorporated in the United
States.
Our corporate affairs are governed by our memorandum and
articles of association and by the laws governing corporations
incorporated in Singapore. The rights of our shareholders and
the responsibilities of the members of our board of directors
under Singapore law are different from those applicable to a
corporation incorporated in the United States. Therefore, our
public shareholders may have more difficulty in protecting their
interest in connection with actions taken by our management,
members of our board of directors or our principal shareholder
than they would as shareholders of a corporation incorporated in
the United States. Please see Comparison of Shareholder
Rights in the accompanying prospectus for a discussion of
differences between Singapore and Delaware corporation law.
S-21
For a
limited period of time, our directors have general authority to
allot and issue new ordinary shares on terms and conditions as
may be determined by our board of directors in its sole
discretion.
Under Singapore law, we may only allot and issue new ordinary
shares with the prior approval of our shareholders in a general
meeting. At our 2011 annual general meeting of shareholders, our
shareholders provided our directors with the general authority
to allot and issue any number of new ordinary shares until the
earlier of (i) the conclusion of our 2012 annual general
meeting, (ii) the expiration of the period within which the
next annual general meeting is required to be held (i.e., within
15 months from the conclusion of the last general meeting)
or (iii) the subsequent revocation or modification of such
general authority by our shareholders acting at a duly noticed
and convened meeting. Subject to the general authority to allot
and issue new ordinary shares provided by our shareholders, the
provisions of the Singapore Companies Act and our memorandum and
articles of association, our board of directors may allot and
issue new ordinary shares on terms and conditions as they may
think fit to impose. Any additional issuances of new ordinary
shares by our directors may adversely impact the market price of
our ordinary shares.
Risks
Relating to Owning Our Ordinary Shares
Influence
of our Sponsors could adversely affect our other
shareholders.
When this offering is completed, investment funds affiliated
with KKR, investment funds affiliated with Silver Lake, Seletar
and Geyser will beneficially own approximately 7.3%, 7.2%, 1.8%
and 1.2% of our outstanding ordinary shares, respectively (based
on the number of ordinary shares outstanding as of May 23,
2011, assuming no exercise of the underwriters
overallotment option to purchase additional shares). In
addition, pursuant to the terms of our Second Amended and
Restated Shareholder Agreement, or the Shareholder Agreement,
KKR and Silver Lake, which we refer to as the Sponsors, can
elect their respective designees to serve as members of our
board of directors. The Sponsors will continue to have a
presence on our board of directors and therefore a significant
influence over our affairs for the foreseeable future, including
significant corporate transactions such as a merger or other
sale of our company or our assets.
At
times, our share price has been volatile and it may fluctuate
substantially in the future, which could result in substantial
losses for our investors.
The trading price of our ordinary shares has, at times,
fluctuated significantly. The trading price of our ordinary
shares could be subject to wide fluctuations in response to many
risk factors listed in this Risk Factors section,
and others, many of which are beyond our control, including:
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actual or anticipated fluctuations in our financial condition
and operating results;
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overall conditions in the semiconductor market and general
economic and market conditions;
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addition or loss of significant customers;
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changes in laws or regulations applicable to our products;
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actual or anticipated changes in our growth rate relative to our
competitors;
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announcements of technological innovations or competitive
products by us or our competitors;
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announcements by us or our competitors of significant
acquisitions, strategic partnerships, joint ventures or capital
commitments;
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additions or departures of key personnel;
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issuance of new or updated research or reports by securities
analysts;
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fluctuations in the valuation of companies perceived by
investors to be comparable to us;
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disputes or other developments related to proprietary rights,
including patents, litigation matters and our ability to obtain
intellectual property protection for our technologies;
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announcement of, or expectation of additional financing efforts;
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S-22
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sales of our ordinary shares by us or our shareholders;
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share price and volume fluctuations attributable to inconsistent
trading volume levels of our shares; and
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changes in our dividend policy.
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Furthermore, the stock markets have experienced extreme price
and volume fluctuations that have affected and continue to
affect the market prices of equity securities of many companies.
These fluctuations often have been unrelated or disproportionate
to the operating performance of those companies. These broad
market and industry fluctuations, as well as general economic,
political and market conditions such as recessions, interest
rate changes or international currency fluctuations, may
negatively impact the market price of our ordinary shares. You
may not realize any return on your investment in us and may lose
some or all of your investment. In the past, companies that have
experienced volatility in the market price of their stock have
been subject to securities class action litigation. We may be
the target of this type of litigation in the future. Securities
litigation against us could result in substantial costs and
divert our managements attention from other business
concerns, which could seriously harm our business.
There has been a public market for our ordinary shares for only
a short period of time. An active, liquid and orderly market for
our ordinary shares may not develop or be sustained, which could
depress the trading price of our ordinary shares. An inactive
market may also impair our ability to raise capital to continue
to fund operations by selling shares and may impair our ability
to acquire other companies or technologies by using our shares
as consideration.
Future
sales of our ordinary shares in the public market could cause
our share price to fall.
Sales of a substantial number of our ordinary shares in the
public market after this offering, including by members of our
management, or the perception that these sales might occur,
could depress the market price of our ordinary shares and could
impair our ability to raise capital through the sale of
additional equity securities.
The selling shareholders, who will together hold approximately
41.3 million ordinary shares after this offering, have
signed
lock-up
agreements with the underwriters of this offering, under which
they have agreed not to sell, transfer or dispose of, directly
or indirectly, any shares of our ordinary shares or any
securities convertible into or exercisable or exchangeable for
ordinary shares without the prior written consent of for a
period of 30 days after the date of this prospectus
supplement. All of the shares that are subject to
lock-up
agreements are subject to the contractual transfer restrictions
in our Shareholder Agreement, which is described under
Description of Share Capital Second Amended
and Restated Shareholder Agreement Transfer
Restrictions in the accompanying prospectus.
The underwriters of this offering may, in their sole discretion,
release all or some portion of the shares subject to the 30-day
lock-up
agreements prior to expiration of such period, and the Company
and the Sponsors may decide to waive the restrictions in the
Shareholder Agreement.
After this offering, the selling shareholders will hold
approximately 41.3 million of our ordinary shares and will
be entitled to rights with respect to registration of such
shares under the Securities Act pursuant to a registration
rights agreement. See Description of Share
Capital Registration Rights Agreement in the
accompanying prospectus. If such holders, by exercising their
registration rights or otherwise, continue to sell a large
number of shares, they could adversely affect the market price
for our ordinary shares. If we register the sale of additional
shares to raise capital, and are required to include shares held
by these holders in such registration pursuant to the exercise
of their registration rights, our ability to raise capital may
be impaired.
In addition, shares issued pursuant to our equity incentive
plans, including such shares issued to members of our
management, may be freely sold in the public market upon vesting
and issuance, subject to the restrictions provided under the
terms of the plan and option agreement under which they were
issued, applicable securities laws and our insider trading
policy.
S-23
There
can be no assurance that we will continue to declare cash
dividends or declare them in any particular
amounts.
The declaration and payment of any future dividend is subject to
the approval of our board of directors and our dividend policy
could change at any time. There can be no assurance that we will
declare cash dividends in the future or in any particular
amounts. The payment of cash dividends is restricted by
applicable law and our corporate structure. Pursuant to
Singapore law and our articles of association, no dividends may
be paid except out of our profits. Also, because we are a
holding company, our ability to pay cash dividends on our
ordinary shares may be limited by restrictions on our ability to
obtain sufficient funds through dividends from subsidiaries,
including restrictions under the terms of our credit agreement.
In addition to these constraints, the payment of cash dividends
in the future, if any, will be at the discretion of our board of
directors and will depend upon such factors as our earnings
levels, capital requirements, contractual restrictions, cash
position and overall financial condition and any other factors
deemed relevant by our board of directors.
Furthermore, any such dividend, if declared, may be an interim
dividend, under Singapore law, which is wholly provisional and
may be revoked by our board of directors at any time prior to
the payment thereof.
The
requirements of being a public company may strain our resources,
divert managements attention and affect our ability to
attract and retain qualified board members.
As a public company, we are subject to the reporting
requirements of the Securities Exchange Act of 1934, as amended,
or the Exchange Act, the Sarbanes-Oxley Act, listing
requirements of The Nasdaq Global Select Market and other
applicable securities rules and regulations. Compliance with
these rules and regulations increases our legal and financial
compliance costs, places significant demands on our systems,
resources and management. As a result, managements
attention may be diverted from other business concerns, which
could have a material adverse effect on our business, financial
condition and results of operations. We may also need to hire
more employees in the future, which will increase our costs and
expenses.
In addition, changing laws, regulations and standards relating
to corporate governance and public disclosure, such as the
Dodd-Frank Wall Street Reform and Consumer Protection Act of
2010, are creating uncertainty for public companies, further
increasing legal and financial compliance costs and making some
activities more time consuming. These laws, regulations and
standards are subject to varying interpretations, in many cases
due to their lack of specificity, and, as a result, their
application in practice may evolve over time as new guidance is
provided by regulatory and governing bodies. This could result
in continuing uncertainty regarding compliance matters and
higher costs necessitated by ongoing revisions to disclosure and
governance practices. We intend to invest resources to comply
with evolving laws, regulations and standards, and this
investment may result in increased general and administrative
expenses and a diversion of managements time and attention
from revenue-generating activities to compliance activities. If
our efforts to comply with new laws, regulations and standards
differ from the activities intended by regulatory or governing
bodies due to ambiguities related to practice, regulatory
authorities may initiate legal proceedings against us and our
business may be harmed.
Being a public company makes it expensive for us to obtain
director and officer liability insurance, and we may be required
to accept reduced coverage or incur substantially higher costs
to obtain coverage. These factors could also make it more
difficult for us to attract and retain qualified members of our
board of directors, particularly to serve on committees of our
board of directors, and qualified executive officers.
Singapore
corporate law may impede a takeover of our company by a
third-party, which could adversely affect the value of our
ordinary shares.
The Singapore Code on Take-overs and Mergers contains provisions
that may delay, deter or prevent a future takeover or change in
control of our company for so long as we remain a public company
with more than 50 shareholders and net tangible assets of
S$5 million or more. Any person acquiring an interest,
whether by a series of transactions over a period of time or
not, either on their own or together with parties acting in
concert with such person, in 30% or more of our voting shares,
or, if such person holds, either on their own or together with
parties acting in concert with such person, between 30% and 50%
(both inclusive) of our voting shares, and such person (or
parties acting in concert with such person) acquires additional
voting shares representing more than 1% of our
S-24
voting shares in any six-month period, must, except with the
consent of the Securities Industry Council in Singapore, extend
a mandatory takeover offer for the remaining voting shares in
accordance with the provisions of the Singapore Code on
Take-overs and Mergers. While the Singapore Code on Take-overs
and Mergers seeks to ensure equality of treatment among
shareholders, its provisions may discourage or prevent certain
types of transactions involving an actual or threatened change
of control of our company. These legal requirements may impede
or delay a takeover of our company by a third-party, which could
adversely affect the value of our ordinary shares.
Our
actual operating results may differ significantly from our
guidance.
From time to time, we release guidance regarding our future
performance that represents our managements estimates as
of the date of release. This guidance, which consists of
forward- looking statements, is prepared by our management and
is qualified by, and subject to, the assumptions and the other
information contained or referred to in the release. Our
guidance is not prepared with a view toward compliance with
published guidelines of the American Institute of Certified
Public Accountants, and neither our independent registered
public accounting firm nor any other independent expert or
outside party compiles or examines the guidance and,
accordingly, no such person expresses any opinion or any other
form of assurance with respect thereto.
Guidance is based upon a number of assumptions and estimates
that, while presented with numerical specificity, is inherently
subject to significant business, economic and competitive
uncertainties and contingencies, many of which are beyond our
control and are based upon specific assumptions with respect to
future business decisions, some of which will change. We
generally state possible outcomes as high and low ranges which
are intended to provide a sensitivity analysis as variables are
changed but are not intended to represent that actual results
could not fall outside of the suggested ranges. The principal
reason that we release this data is to provide a basis for our
management to discuss our business outlook with analysts and
investors. We do not accept any responsibility for any
projections or reports published by any such persons.
Guidance is necessarily speculative in nature, and it can be
expected that some or all of the assumptions of the guidance
furnished by us will not materialize or will vary significantly
from actual results. Accordingly, our guidance is only an
estimate of what management believes is realizable as of the
date of release. Actual results will vary from the guidance and
the variations may be material. Investors should also recognize
that the reliability of any forecasted financial data diminishes
the farther in the future that the data is forecast. In light of
the foregoing, investors are urged to put the guidance in
context and not to place undue reliance on it.
Any failure to successfully implement our operating strategy or
the occurrence of any of the events or circumstances set forth
in, or incorporated by reference into, this prospectus could
result in the actual operating results being different than the
guidance, and such differences may be adverse and material.
S-25
USE OF
PROCEEDS
The selling shareholders will receive all of the proceeds from
this offering, and we will not receive any proceeds from the
sale of ordinary shares in this offering. We will pay the
expenses associated with the sale of those ordinary shares
pursuant to the Registration Rights Agreement described under
Description of Share Capital Registration
Rights Agreement in the accompanying prospectus, other
than the underwriting discounts and commissions attributable to
shares sold by the selling shareholders. The selling
shareholders include KKR and Silver Lake, which are affiliated
with directors of our company. The selling shareholders
collectively own approximately 26.9% of our ordinary shares
prior to this offering. See Selling Shareholders.
PRICE
RANGE OF ORDINARY SHARES
Market
Information
Our ordinary shares have been listed on The Nasdaq Global Select
Market under the symbol AVGO since our IPO on
August 6, 2009. Prior to that date, there was no public
market for our ordinary shares. The following table sets forth,
for the periods indicated, the high and low sales prices of our
ordinary shares as reported by The Nasdaq Global Select Market:
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High
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Low
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Fiscal Year Ended November 1, 2009
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Fourth Quarter (beginning August 6, 2009)
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$
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19.00
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$
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14.72
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Fiscal Year Ended October 31, 2010
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First Quarter
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$
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19.55
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$
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14.33
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Second Quarter
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22.88
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16.50
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Third Quarter
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23.69
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18.38
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Fourth Quarter
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24.95
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18.41
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Fiscal Year Ending October 30, 2011
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First Quarter
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$
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29.44
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$
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23.77
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Second Quarter
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34.60
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27.95
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Third Quarter (through May 27, 2011)
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36.18
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31.48
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The closing sale price per ordinary share on May 27, 2011,
as reported by The Nasdaq Global Select Market, was $35.01.
Holders
As of May 23, 2011, there were 14 holders of record of our
ordinary shares. A substantially greater number of shareholders
are street name or beneficial holders, whose shares
are held of record by banks, brokers and other financial
institutions.
DIVIDEND
POLICY
Our board of directors has adopted a dividend policy authorizing
us to pay a quarterly cash dividend. On December 30, 2010,
we paid a cash dividend of $0.07 per ordinary share to our
shareholders of record on December 15, 2010. On
March 30, 2011, we paid a cash dividend of $0.08 per
ordinary shares to our shareholders of record on March 18,
2011.
Our board of directors reviews our dividend policy regularly and
the declaration and payment of any future cash dividends will be
at the discretion and approval of our board of directors and
subject to the boards continuing determination that they
are in the best interests of the Company. Future dividend
payments will also depend upon such factors as our earnings
levels, capital requirements, contractual restrictions, cash
position, overall financial condition and any other factors
deemed relevant by our board of directors.
The payment of cash dividends on ordinary shares is restricted
under applicable law and our corporate structure. Pursuant to
Singapore law and our articles of association, no dividends may
be paid except out of our profits. Also, because we are a
holding company, our ability to pay cash dividends on our
ordinary shares may be limited by restrictions on our ability to
obtain sufficient funds through dividends from subsidiaries,
including restrictions under the terms of our senior credit
agreement.
S-26
SELLING
SHAREHOLDERS
The following table sets forth information about the beneficial
ownership of our ordinary shares at May 23, 2011 for
each of the selling shareholders.
We have determined beneficial ownership in accordance with the
rules of the SEC. Except as indicated by the footnotes below, we
believe, based on the information furnished to us, that the
persons and entities named in the table below have sole voting
and investment power with respect to all ordinary shares that
they beneficially own, subject to applicable community property
laws.
Ordinary shares subject to options that are currently
exercisable or exercisable within 60 days of May 23,
2011 are deemed to be outstanding and to be beneficially
owned by the person holding the options for the purpose of
computing the percentage ownership of that person or entity but
are not treated as outstanding for the purpose of computing the
percentage ownership of any other person or entity.
Percentage ownership is based on 246,520,763 ordinary shares
outstanding on May 23, 2011.
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Ordinary
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Shares
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Beneficially
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Ordinary Shares
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Percentage of Shares
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Owned(1)
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Beneficially Owned(1)
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Beneficially Owned
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After the
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After the
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Offering
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Offering
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Shares
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(Over-
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(Over-
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Subject to
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allotment
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allotment
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Shares
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Over-
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Option
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Prior to
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Option
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Prior to the
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Being
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allotment
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After the
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Exercised
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the
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After the
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Exercised
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Offering
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Offered
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Option
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Offering
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in Full)**
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Offering
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Offering
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in Full)**
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Funds affiliated with KKR(2)
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28,953,622
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10,923,796
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1,638,569
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18,029,826
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16,391,257
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11.7
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%
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7.3
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%
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6.6
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%
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Suite 500,
603-7th Avenue
S.W.
Calgary, Canada
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Funds affiliated with Silver Lake(3)
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28,529,808
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10,763,895
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1,614,585
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17,765,913
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16,151,328
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11.6
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%
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7.2
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%
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6.6
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%
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Ugland House, P.O. Box 309
South Church Street,
George Town
Grand Cayman, Cayman Islands
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Kenneth Y. Hao(4)
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28,579,808
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10,763,895
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1,614,585
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17,815,913
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16,201,328
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11.6
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%
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7.2
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%
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6.6
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%
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Seletar Investments Pte Ltd(5)
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7,090,433
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|
2,675,121
|
|
|
|
401,268
|
|
|
|
4,415,312
|
|
|
|
4,014,044
|
|
|
|
2.9
|
%
|
|
|
1.8
|
%
|
|
|
1.6
|
%
|
60B Orchard Road #06-18,
Tower 2
The Atrium @ Orchard
Singapore 238891
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|
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|
|
|
|
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|
Geyser Investment Pte. Ltd.(6)
|
|
|
4,726,954
|
|
|
|
1,783,414
|
|
|
|
267,512
|
|
|
|
2,943,540
|
|
|
|
2,676,028
|
|
|
|
1.9
|
%
|
|
|
1.2
|
%
|
|
|
1.1
|
%
|
c/o GIC
168 Robinson Road
#37-01 Capital Tower
Singapore 068912
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|
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|
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|
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|
|
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|
Integral Capital Partners VII LP(7)
|
|
|
423,839
|
|
|
|
159,909
|
|
|
|
23,986
|
|
|
|
263,930
|
|
|
|
239,944
|
|
|
|
|
*
|
|
|
|
*
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|
|
|
*
|
3000 Sand Hill Road
Building 3, Suite 240
Menlo Park, California 94025
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Capstone Equity Investors LLC(8)
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|
|
344,992
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|
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|
130,161
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|
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|
19,524
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|
|
|
214,831
|
|
|
|
195,307
|
|
|
|
|
*
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|
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|
*
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*
|
9 West 57th Street
11th Floor
New York, NY 10019
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* |
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Represents beneficial ownership of less than 1%. |
|
** |
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If the underwriters do not exercise their option to purchase
additional shares in full, then the shares to be sold by each
selling shareholder will be reduced pro rata according to the
portion of the over-allotment option that is not exercised. |
S-27
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|
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(1) |
|
Shares shown in the table above include shares held in the
beneficial owners name or jointly with others, or in the
name of a bank, nominee or trustee for the beneficial
owners account. |
|
(2) |
|
Shares shown in the table above consist of
(a) 5,583,909 shares directly held by KKR Millennium
Fund (Overseas), Limited Partnership, or Millennium Fund,
(b) 11,118,310 shares directly held by KKR European
Fund Limited Partnership, or European Fund,
(c) 7,457,230 shares directly held by KKR European
Fund II, Limited Partnership, or European Fund II,
(d) 987,256 shares directly held by KKR Partners
(International) Limited Partnership, or KKR Partners, and
(e) 3,806,917 shares directly held by Avago Investment
Partners Limited Partnership, or AIP. |
|
|
|
KKR Associates Millennium (Overseas), Limited Partnership is the
sole general partner of Millennium Fund. KKR Millennium Limited
is the sole general partner of KKR Associates Millennium
(Overseas), Limited Partnership. In such capacities, KKR
Associates Millennium (Overseas), Limited Partnership and KKR
Millennium Limited may be deemed to beneficially own the
5,583,909 ordinary shares directly held by Millennium Fund, but
disclaim such beneficial ownership. KKR Associates Europe,
Limited Partnership is the sole general partner of European
Fund. KKR Europe Limited is the sole general partner of KKR
Associates Europe, Limited Partnership. KKR Associates Europe,
Limited Partnership and KKR Europe Limited disclaim beneficial
ownership of the 11,118,310 ordinary shares directly held by
European Fund. |
|
|
|
KKR Associates Europe II, Limited Partnership is the sole
general partner of European Fund II. KKR Europe II
Limited is the sole general partner of KKR Associates Europe II,
Limited Partnership. In such capacities, KKR Associates Europe
II, Limited Partnership and KKR Europe II Limited may be
deemed to beneficially own the 7,457,230 ordinary shares
directly held by European Fund II, but disclaim such
beneficial ownership. |
|
|
|
Avago Investment G.P., Limited is the sole general partner of
AIP. KKR Millennium GP LLC is a member of Avago Investment G.P.,
Limited. In such capacities, Avago Investment G.P., Limited and
KKR Millennium GP LLC may be deemed to beneficially own the
3,806,917 ordinary shares directly held by AIP, but disclaim
such beneficial ownership. |
|
|
|
Each of KKR SP Limited, or KKR SP (as a voting partner to each
of KKR Associates Millennium (Overseas), Limited Partnership,
KKR Associates Europe, Limited Partnership and KKR Associates
Europe II, Limited Partnership); KKR Fund Holdings L.P., or
KKR Fund Holdings (as the sole shareholder of KKR
Millennium Limited, KKR Europe Limited and KKR Europe II
Limited and the designated member of KKR Millennium GP LLC); KKR
Fund Holdings GP Limited, or KKR Fund Holdings GP (as
a general partner of KKR Fund Holdings); KKR Group Holdings
L.P., or KKR Group Holdings (as the sole shareholder of KKR
Fund Holdings GP and a general partner of KKR
Fund Holdings); KKR Group Limited, or KKR Group (as the
general partner of KKR Group Holdings); KKR & Co.
L.P., or KKR & Co. (as the sole shareholder of KKR
Group); and KKR Management LLC (as the general partner of
KKR & Co.) may also be deemed to be the beneficial
owner of the securities held by Millennium Fund, European Fund
and European Fund II. |
|
|
|
KKR 1996 Overseas, Limited is the sole general partner of KKR
Partners, but disclaims beneficial ownership of the 987,256
ordinary shares directly held by KKR Partners. |
|
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|
As the designated members of KKR Management LLC,
Messrs. Henry R. Kravis and George R. Roberts may be deemed
to be the beneficial owner of the securities held by Millennium
Fund, European Fund and European Fund II but disclaim
beneficial ownership of such securities. As directors of KKR
1996 Overseas, Limited, each of Messrs. Henry R. Kravis,
George R. Roberts, James H. Greene, Jr., Paul E. Raether,
Michael W. Michelson, Johannes P. Huth, Todd A. Fisher,
Alexander Navab, Marc S. Lipschultz, Reinhard Gorenflos, Joseph
Y. Bae, Brian F. Carroll, Scott C. Nuttall and William J.
Janetschek may be deemed to be the beneficial owner of the
securities held by KKR Partners but disclaims beneficial
ownership of such securities. The entities named in this note
(2) excluding AIP are sometimes referred to as the KKR
Entities. Adam H. Clammer is a member of our board of directors
and is an executive of Kohlberg Kravis Roberts & Co.
L.P. and/or
one or more of its affiliates. Mr. Clammer disclaims
beneficial ownership of any securities beneficially owned by the
KKR Entities. The address of the KKR Entities and the
individuals named in this note (2) other than
Messrs. Roberts, Greene, Michelson and Clammer is
c/o Kohlberg
Kravis Roberts & Co. L.P., 9 West
57th Street, New York, NY 10019. The address of
Messrs. Roberts, Greene, Michelson and Clammer is
c/o Kohlberg
Kravis Roberts & Co. L.P., 2800 Sand Hill Road,
Suite 200, Menlo Park, CA 94025. The address of AIP is
P.O. Box 309, Ugland House, Grand Cayman KY1-1104,
Cayman Islands. |
S-28
|
|
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(3) |
|
Consists of (i) 24,652,805 shares directly held by
Silver Lake Partners II Cayman, L.P., or SLP II Cayman,
(ii) 70,086 shares directly held by Silver Lake
Technology Investors II Cayman, L.P., or SLTI II Cayman and
(iii) 3,806,917 shares directly held by AIP (as
defined in footnote (2) above). The shares in the columns
entitled After the Offering do not include an
in-kind distribution of 89,259 ordinary shares to be made to
certain limited partners of SLTI II Cayman in connection
with this offering. For ease of reference, SLP II Cayman and
SLTI II Cayman are collectively referred to as the Silver
Lake Funds in this footnote. |
|
|
|
Silver Lake Technology Associates II Cayman, L.P., or SLTA
II Cayman, is the general partner of SLP II Cayman. Silver Lake
(Offshore) AIV GP II, Ltd. is (a) the general partner of
each of SLTA II Cayman and SLTI II Cayman and (b) a member
of Avago Investment G.P., Limited. In such capacities, SLTA II
Cayman may be deemed to beneficially own the ordinary shares
directly held by SLP II Cayman, and Silver Lake (Offshore) AIV
GP II, Ltd. may be deemed to beneficially own the ordinary
shares directly held by the Silver Lake Funds and AIP, but SLTA
II Cayman and Silver Lake (Offshore) AIV GP II, Ltd. disclaim
such beneficial ownership. As directors of Silver Lake
(Offshore) AIV GP II, Ltd., each of Messrs. James A.
Davidson, Glenn H. Hutchins, David J. Roux, Alan K. Austin,
Michael J. Bingle, Charles Giancarlo, Andy Wagner, Greg Mondre
and Kenneth Y. Hao, Ms. Yolande A. Jun and Ms. Karen
M. King may be deemed to be the beneficial owner of the ordinary
shares held by the Silver Lake Funds and AIP but disclaims
beneficial ownership of such ordinary shares. |
|
(4) |
|
As disclosed in Footnote (3) above, Mr. Hao is a
director of Silver Lake (Offshore) AIV GP II, Ltd. Amounts
disclosed for Mr. Hao include shares beneficially owned by
the Silver Lake Funds and AIP. Mr. Hao disclaims beneficial
ownership of any shares beneficially owned by the Silver Lake
Funds and AIP. See Footnote (3) above. Mr. Hao also
serves as a member of our board of directors. The shares listed
next to his name in the table above include 50,000 shares
held by Mr. Hao pursuant to the exercise of an option
granted to Mr. Hao in April 2006 in connection with his
service as our director. Pursuant to Mr. Haos
arrangement with Silver Lake with respect to director
compensation, upon the sale of such shares (including the shares
received from the exercise of options), the proceeds from such
sale are expected to be remitted to Silver Lake. Accordingly,
Mr. Hao disclaims beneficial ownership of such shares. |
|
(5) |
|
Seletar Investments Pte Ltd, or Seletar, is directly
wholly-owned by Temasek Capital (Private) Limited, or Temasek
Capital, which is wholly-owned by Temasek Holdings (Private)
Limited, or Temasek. Seletar, Temasek Capital and Temasek are
Singapore companies. No individual has beneficial ownership over
the 9,765,554 ordinary shares. Voting and investment decisions
relating to these securities are made by the board of directors
of Seletar, which is currently comprised of Mr. Syn Yi Ming
and Ms. Michelle Git. The Seletar board of directors acts
by majority vote and no board member may act individually to
vote or sell these ordinary shares. |
|
(6) |
|
Geyser Investment Pte. Ltd. shares the power to vote and power
to dispose of these securities with each of GIC Special
Investments Pte. Ltd. and the Government of Singapore Investment
Corporation Pte. Ltd., each of which is a Singapore private
limited company. No individual has beneficial ownership over
these securities. Voting and investment decisions relating to
these securities are made by the GIC Special Investments Pte.
Ltd. investment committee, which is currently comprised of eight
members: Teh Kok Peng, Ng Kin Sze, Ang Eng Seng, Kunna Chinniah,
Tay Lim Hock, Eugene Wong, John Tang and Mayukh Mitter. The
investment committee acts by majority vote and no member may act
individually to vote or sell these securities. Beneficial
ownership is disclaimed by the investment committee and its
members. |
|
(7) |
|
Integral Capital Management VII, LLC, or Integral Capital
Management, is the general partner of Integral Capital Partners
VII, LP, or Integral Capital Partners, and in such capacity, may
be deemed to be the beneficial owner of the securities held by
Integral Capital Partners but disclaims beneficial ownership of
such ordinary shares. As managing directors of Integral Capital
Management, each of Messrs. John A. Powell, Charles A.
Morris, Brian D. Stansky and Glen Kacher and Ms. Pamela A.
Hagenah may be deemed to be the beneficial owner of the ordinary
shares held by Integral Capital Partners but disclaims
beneficial ownership of such ordinary shares. |
|
(8) |
|
Mr. Dean Nelson, as the managing member of Capstone Equity
Investors LLC, has sole voting and dispositive power over the
ordinary shares and may be deemed to share beneficial ownership
of any shares beneficially owned by Capstone Equity Investors
LLC, but disclaims such beneficial ownership except to the
extent of his pecuniary interest. |
S-29
TAX
CONSIDERATIONS
The following discussion of the material U.S. federal
income tax and Singapore tax consequences of an investment in
our ordinary shares is based upon laws and relevant
interpretations thereof in effect as of the date of this
prospectus supplement, all of which are subject to change. This
discussion does not address all possible tax consequences
relating to an investment in the ordinary shares, such as the
tax consequences under state, local and other tax laws. To the
extent that the discussion relates to matters of Singapore tax
law, it represents the opinion of WongPartnership LLP, our
Singapore counsel. Based on the facts and subject to the
limitations set forth herein, the statements of law or legal
conclusions under the caption
U.S. Federal Income Taxation
constitute the opinion of Latham & Watkins LLP, our
special U.S. counsel, as to the material U.S. federal
income tax consequences to U.S. Holders (as defined below)
under current law of an investment in the ordinary shares.
U.S.
Federal Income Taxation
The following discussion describes certain material
U.S. federal income tax consequences to U.S. Holders
(as defined below) under current law of an investment in our
ordinary shares. This discussion applies only to
U.S. Holders that hold our ordinary shares as capital
assets (generally, property held for investment) and that have
the U.S. dollar as their functional currency. This
discussion is based on the tax laws of the United States in
effect as of the date of this prospectus supplement and on
U.S. Treasury regulations in effect or, in some cases,
proposed, as of the date of this prospectus supplement, as well
as judicial and administrative interpretations thereof available
on or before such date. All of the foregoing authorities are
subject to change, which could apply retroactively and could
affect the tax consequences described below.
The following discussion does not address the tax consequences
to any particular investor or to persons in special tax
situations such as:
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|
banks;
|
|
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|
certain financial institutions;
|
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|
|
insurance companies;
|
|
|
|
regulated investment companies;
|
|
|
|
real estate investment trusts;
|
|
|
|
broker-dealers;
|
|
|
|
traders that elect to use a
mark-to-market
method of accounting;
|
|
|
|
U.S. expatriates;
|
|
|
|
tax-exempt entities;
|
|
|
|
persons liable for alternative minimum tax;
|
|
|
|
persons holding our ordinary shares as part of a straddle,
hedging, constructive sale, conversion or integrated transaction;
|
|
|
|
persons that actually or constructively own 10% or more of the
total combined voting power of all classes of our voting stock;
|
|
|
|
persons who acquired our ordinary shares pursuant to the
exercise of any employee share option or otherwise as
compensation; or
|
|
|
|
partnerships or other pass-through entities, or persons holding
our ordinary shares through such entities.
|
In addition, the discussion below does not describe any tax
consequences arising out of the Medicare tax on certain
net investment income pursuant to the Health Care
and Education Reconciliation Act of 2010.
PROSPECTIVE INVESTORS SHOULD CONSULT THEIR TAX ADVISORS
REGARDING THE APPLICATION OF THE U.S. FEDERAL TAX
RULES TO THEIR PARTICULAR CIRCUMSTANCES AS
S-30
WELL AS THE STATE, LOCAL,
NON-U.S. AND
OTHER TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND
DISPOSITION OF OUR ORDINARY SHARES.
The discussion below of the U.S. federal income tax
consequences to U.S. Holders will apply to you
if you are a beneficial owner of our ordinary shares and you are
for U.S. federal income tax purposes:
|
|
|
|
|
an individual who is a citizen or resident of the United States;
|
|
|
|
a corporation (or other entity taxable as a corporation for
U.S. federal income tax purposes) created or organized in
the United States or under the laws of the United States, any
state thereof or the District of Columbia;
|
|
|
|
an estate, the income of which is subject to U.S. federal income
taxation regardless
of its source; or
|
|
|
|
a trust that (1) is subject to the primary supervision of a
court within the United States and the control of one or more
U.S. persons for all substantial decisions or (2) has
a valid election in effect under applicable U.S. Treasury
regulations to be treated as a U.S. person.
|
If a partnership (or other entity taxable as a partnership for
U.S. federal income tax purposes) holds our ordinary
shares, the tax treatment of a partner in such partnership will
generally depend upon the status of the partner and the
activities of the partnership. If you are a partnership holding
our ordinary shares, or a partner in such partnership, you
should consult your tax advisors.
Taxation
of Dividends and Other Distributions on the Ordinary
Shares
Subject to the passive foreign investment company rules
discussed below, the U.S. dollar amount of the gross amount
of any distribution we make to you with respect to our ordinary
shares (including the amount of any taxes withheld therefrom)
will generally be includible in your gross income, in the year
actually or constructively received, as dividend income, but
only to the extent that such distribution is paid out of our
current or accumulated earnings and profits (as determined under
U.S. federal income tax principles). To the extent that the
amount of the distribution exceeds our current and accumulated
earnings and profits (as determined under U.S. federal
income tax principles), such excess will be treated first as a
tax-free return of your tax basis in the ordinary shares you
hold, and then, to the extent such excess amount exceeds your
tax basis in the ordinary shares, as capital gain. If we do not
calculate our earnings and profits under U.S. federal
income tax principles, you should expect that any distribution
we make to you will be reported as a dividend even if such
distribution would otherwise be treated as a tax-free return of
capital or as capital gain under the rules described above. Any
dividends we pay will not be eligible for the dividends-received
deduction allowed to corporations in respect of dividends
received from other U.S. corporations.
With respect to certain non-corporate U.S. Holders,
including individual U.S. Holders, for taxable years
beginning before January 1, 2013, dividends will be taxed
at the lower capital gains rate applicable to qualified
dividend income, provided that (1) our ordinary
shares are readily tradable on an established securities market
in the United States, (2) we are neither a passive foreign
investment company nor treated as such with respect to you (as
discussed below) for our taxable year in which the dividend is
paid and the preceding taxable year, and (3) certain
holding period requirements are met. Under U.S. Internal
Revenue Service authority, common or ordinary shares are
considered for the purpose of clause (1) above to be
readily tradable on an established securities market in the
United States if they are listed on the Nasdaq Global Select
Market, as are our ordinary shares. You should consult your tax
advisors regarding the availability of the lower capital gains
rate applicable to qualified dividend income for any dividends
we pay with respect to the ordinary shares.
For foreign tax credit purposes, the limitation on foreign taxes
eligible for credit is calculated separately with respect to
specific classes of income. For this purpose, any dividends we
pay with respect to our ordinary shares will generally
constitute passive category income but could, in the
case of certain U.S. Holders, constitute general
category income. Any dividends we pay to you will
generally constitute foreign source income for foreign tax
credit limitation purposes. If the dividends are taxed as
qualified dividend income (as discussed above), the amount of
the dividend taken into account for purposes of calculating the
foreign tax credit limitation will be limited to the gross
amount of the dividend, multiplied by the reduced tax rate
applicable to qualified dividend income and
S-31
divided by the highest tax rate normally applicable to
dividends. The rules relating to the determination of the
foreign tax credit are complex and you should consult your tax
advisors regarding the availability of a foreign tax credit in
your particular circumstances.
Taxation
of Dispositions of the Ordinary Shares
Subject to the passive foreign investment company rules
discussed below, you will recognize taxable gain or loss on any
sale, exchange or other taxable disposition of an ordinary share
equal to the difference between the amount realized (in
U.S. dollars) for the ordinary share and your tax basis (in
U.S. dollars) in the ordinary share. The gain or loss will
generally be capital gain or loss. If you are a non-corporate
U.S. Holder, including an individual U.S. Holder, that
has held the ordinary share for more than one year, you may be
eligible for reduced tax rates. The deductibility of capital
losses is subject to limitations. Any gain or loss that you
recognize on a disposition of our ordinary shares will generally
be treated as U.S. source income or loss for foreign tax
credit limitation purposes. You should consult your tax advisors
regarding the proper treatment of gain or loss in your
particular circumstances.
Passive
Foreign Investment Company
Based on the current and anticipated valuation of our assets,
including goodwill, and composition of our income and assets, we
do not expect to be a passive foreign investment company, or
PFIC, for U.S. federal income tax purposes for our 2011
taxable year or any future taxable year. However, the
application of the PFIC rules is subject to ambiguity in several
respects. In addition, our actual PFIC status for the current
taxable year or any future taxable year will not be determinable
until after the close of each such year. Accordingly, we cannot
assure you that we will not be a PFIC for our current taxable
year or any future taxable year. Because PFIC status is a
factual determination for each taxable year that cannot be made
until after the close of each such year, Latham &
Watkins LLP, our special U.S. counsel, expresses no opinion
with respect to our PFIC status and also expresses no opinion
with respect to our expectations set forth in this paragraph.
A
non-U.S. corporation
will be a PFIC for any taxable year if, applying certain
look-through rules, either:
|
|
|
|
|
at least 75% of its gross income for such year is passive
income, or
|
|
|
|
at least 50% of the value of its assets (based on an average of
the quarterly values of the assets) during such year is
attributable to assets that produce passive income or are held
for the production of passive income (the asset
test).
|
We must make a separate determination each taxable year as to
whether we are a PFIC. As a result, our PFIC status may change.
In particular, because the value of our assets for purposes of
the asset test will generally be determined by reference to the
market price of our ordinary shares, fluctuations in the market
price of the ordinary shares may cause us to become a PFIC. In
addition, changes in the composition of our income and assets
may cause us to become a PFIC. If we are a PFIC for any taxable
year during which you hold ordinary shares, we will continue to
be treated as a PFIC with respect to you for all succeeding
years during which you hold the ordinary shares, unless we cease
to be a PFIC and you make a deemed sale election
with respect to the ordinary shares. If such election is timely
made, you will be deemed to have sold the ordinary shares you
hold at their fair market value on the last day of the last
taxable year for which we were a PFIC and any gain from such
deemed sale would be subject to the rules described in the
following paragraph. In addition, a new holding period would be
deemed to begin for the ordinary shares for purposes of the PFIC
rules. After the deemed sale election, so long as we do not
become a PFIC in a subsequent taxable year, your ordinary shares
with respect to which such election was made will not be treated
as shares in a PFIC.
For each taxable year that we are treated as a PFIC with respect
to you, you will be subject to special tax rules with respect to
any excess distribution that you receive and any
gain you recognize from a sale or other disposition (including a
pledge) of the ordinary shares, unless you make a
mark-to-market
election as discussed below. Distributions you receive in a
taxable year that are greater than 125% of the average annual
distributions you received during the shorter of the three
preceding taxable years or your holding period for the ordinary
shares will be treated as an excess distribution. Under these
special tax rules:
|
|
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|
|
the excess distribution or recognized gain will be allocated
ratably over your holding period for the ordinary shares,
|
S-32
|
|
|
|
|
the amount allocated to the current taxable year, and any
taxable years in your holding period prior to the first taxable
year in which we were a PFIC, will be treated as ordinary
income, and
|
|
|
|
the amount allocated to each other taxable year will be subject
to the highest tax rate in effect for individuals or
corporations, as applicable, for each such year, and the
interest charge generally applicable to under- payments of tax
will be imposed on the resulting tax attributable to each such
year.
|
A U.S. Holder of marketable stock (as defined
below) in a PFIC may make a
mark-to-market
election for such stock to elect out of the PFIC rules described
above regarding excess distributions and recognized gains. If
you make a
mark-to-market
election for our ordinary shares, you will include in gross
income for each year that we are a PFIC an amount equal to the
excess, if any, of the fair market value of the ordinary shares
you hold as of the close of your taxable year over your adjusted
basis in such ordinary shares. You will be allowed a deduction
for the excess, if any, of the adjusted basis of the ordinary
shares over their fair market value as of the close of the
taxable year. However, deductions will be allowable only to the
extent of any net
mark-to-market
gains on the ordinary shares included in your income for prior
taxable years. Amounts included in your income under a
mark-to-market
election, as well as any gain on the actual sale or other
disposition of the ordinary shares, will be treated as ordinary
income. If you make a valid
mark-to-market
election, any distributions that we make would generally be
subject to the tax rules discussed above under
Taxation of Dividends and Other Distributions
on the Ordinary Shares, except that the lower tax rate
applicable to qualified dividend income generally would not
apply.
The
mark-to-market
election is available only for marketable stock,
which is stock that is traded in other than de minimis
quantities on at least 15 days during each calendar
quarter (regularly traded) on a qualified exchange
or other market, as defined in applicable U.S. Treasury
regulations. Our ordinary shares are listed on the Nasdaq Global
Select Market, which is a qualified exchange or other market for
these purposes. Consequently, we expect that, provided the
ordinary shares are regularly traded and you are a holder of the
ordinary shares, the
mark-to-market
election would be available to you if we become a PFIC. You
should consult your tax advisors as to the availability and
desirability of a
mark-to-market
election.
Alternatively, a U.S. Holder of stock in a PFIC may make a
qualified electing fund election with respect to
such PFIC to elect out of the PFIC rules described above
regarding excess distributions and recognized gains. A
U.S. Holder that makes a valid qualified electing fund
election with respect to a PFIC will generally include in gross
income for a taxable year such holders pro rata
share of the corporations earnings and profits for the
taxable year. However, the qualified electing fund election is
available only if the PFIC provides such U.S. Holder with
certain information regarding its earnings and profits as
required under applicable U.S. Treasury regulations. We
currently do not intend to prepare or provide the information
that would enable you to make a qualified electing fund election.
Unless otherwise provided by the U.S. Treasury, each
U.S. shareholder of a PFIC is required to file an annual
report containing such information as the U.S. Treasury may
require. If we become a PFIC, you should consult your tax
advisors regarding any reporting requirements that may apply to
you.
You should consult your tax advisors regarding the application
of the PFIC rules to your investment in our ordinary shares and
the elections discussed above or any other elections that may be
available to you.
Information
Reporting and Backup Withholding
Dividend payments with respect to ordinary shares and proceeds
from the sale, exchange or redemption of ordinary shares will
generally be subject to information reporting to the
U.S. Internal Revenue Service and possible U.S. backup
withholding. Backup withholding will not apply, however, to a
U.S. Holder that furnishes a correct taxpayer
identification number and makes any other required certification
on U.S. Internal Revenue Service
Form W-9
or that is otherwise exempt from backup withholding.
U.S. Holders that are exempt from backup withholding should
still complete U.S. Internal Revenue Service
Form W-9
to avoid possible erroneous backup withholding. Certain
individuals holding ordinary shares other than in an account at
certain financial institutions may be subject to additional
information reporting requirements. You should consult your tax
advisors regarding the application of the U.S. information
reporting and backup withholding rules.
Backup withholding is not an additional tax. Amounts withheld as
backup withholding may be credited against your
U.S. federal income tax liability, and you may obtain a
refund of any excess amounts withheld under the
S-33
backup withholding rules by filing an appropriate claim for
refund with the U.S. Internal Revenue Service and
furnishing any required information in a timely manner.
Singapore
Tax Considerations
The following discussion is a summary of Singapore tax, stamp
duty and estate duty considerations relevant to the purchase,
ownership and disposition of our ordinary shares by an investor
who is not tax resident or domiciled in Singapore and who does
not carry on business or otherwise have a presence in Singapore.
The statements made herein regarding taxation are based on
certain aspects of the tax laws of Singapore and administrative
guidelines issued by the relevant authorities in force as of the
date hereof and are subject to any changes in such laws or
administrative guidelines, or in the interpretation of those
laws or guidelines, occurring after such date, which changes
could be made on a retroactive basis. The statements made herein
do not describe all of the tax considerations that may be
relevant to all Avago shareholders, some of which (such as
dealers in securities) may be subject to different rules. Each
prospective investor should consult an independent tax advisor
regarding all Singapore income and other tax consequences
applicable to them from owning or disposing of our ordinary
shares in light of the investors particular circumstances.
Income
Taxation Under Singapore Law
Distributions with Respect to Ordinary
Shares. Singapore does not impose withholding tax
on dividends. Under the one-tier corporate tax system which
currently applies to all Singapore tax resident companies, tax
on corporate profits is final, and dividends paid by a Singapore
tax resident company will be tax exempt in the hands of a
shareholder, whether or not the shareholder is a company or an
individual and whether or not the shareholder is a Singapore tax
resident.
Capital Gains upon Disposition of Ordinary
Shares. Under current Singapore tax laws, there
is no tax on capital gains. As such, any profits from the
disposal of our ordinary shares would not ordinarily be taxable
in Singapore. However, if the gains from the disposal of
ordinary shares are construed to be of an income nature (which
could be the case if, for instance, the gains arise from the
carrying on of a trade or business in Singapore), the disposal
profits would be taxable as income rather than capital gains.
Stamp
Duty
There is no Singapore stamp duty payable in respect of the
issuance or holding of our ordinary shares. Singapore stamp duty
will be payable if there is an instrument of transfer executed
in Singapore or if there is an instrument of transfer executed
outside of Singapore which is received in Singapore. Under
Singapore law, stamp duty is not applicable to electronic
transfers of our shares effected on a book entry basis. We
therefore expect that no Singapore stamp duty will be payable in
respect of ordinary shares purchased by U.S. holders in
this offering assuming that they are acquired in book entry form
through the facility established by our transfer agent and
registrar. Where shares evidenced in certificated form are
transferred and an instrument of transfer is executed between
the parties, Singapore stamp duty is payable on an instrument of
transfer of the shares at the rate of S$0.20 for every S$100 or
part thereof of the consideration for, or market value of, the
shares, whichever is higher. The Singapore stamp duty is borne
by the purchaser unless there is an agreement to the contrary.
Where the instrument of transfer is executed outside of
Singapore, Singapore stamp duty must be paid within 30 days
of receipt in Singapore if the instrument of transfer is
received in Singapore.
Estate
Duty
Singapore estate duty has been abolished with effect from
February 15, 2008 in relation to the estate of any person
whose death has occurred on or after February 15, 2008.
Tax
Treaties Regarding Withholding Taxes
There is no comprehensive avoidance of double taxation agreement
between the United States and Singapore which applies to
withholding taxes on dividends or capital gains.
S-34
UNDERWRITING
Avago Technologies Limited, the selling shareholders, Deutsche
Bank Securities Inc., Barclays Capital Inc. and Citigroup Global
Markets Inc. have entered into an underwriting agreement with
respect to the shares being offered. Subject to certain
conditions, Deutsche Bank Securities Inc., Barclays Capital Inc.
and Citigroup Global Markets Inc. have agreed to purchase the
following respective number of ordinary shares at a public
offering price less the underwriting discounts and commissions
set forth on the cover page of this prospectus supplement:
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Number of
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Underwriters
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|
Shares
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Deutsche Bank Securities Inc.
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|
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8,333,334
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Barclays Capital Inc.
|
|
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8,333,333
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Citigroup Global Markets Inc.
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|
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8,333,333
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|
|
|
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|
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Total
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|
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25,000,000
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|
|
|
|
|
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The underwriting agreement provides that the obligations of the
several underwriters to purchase the ordinary shares offered
hereby are subject to certain conditions precedent and that the
underwriters will purchase all of the ordinary shares offered by
this prospectus supplement, other than those covered by the
underwriters over-allotment option to purchase additional
shares described below, if any of these shares are purchased.
We and the selling shareholders have been advised that the
underwriters propose to offer the ordinary shares to the public
at the public offering price set forth on the cover page of this
prospectus supplement and to dealers at a price that represents
a concession not in excess of $0.20 per share under the public
offering price. After the initial offering of the ordinary
shares, the underwriters may change the offering price and other
selling terms. The offering of the shares by the underwriters is
subject to their receipt and acceptance of the shares from the
selling shareholders and further subject to the
underwriters right to reject any order in whole or in part.
Deutsche Bank Securities Inc., Barclays Capital Inc. and
Citigroup Global Markets Inc. may receive from purchasers of the
shares normal brokerage commissions in amounts agreed with such
purchasers.
The selling shareholders have granted to the underwriters an
option, exercisable not later than 30 days after the date
of this prospectus supplement, to purchase in whole or in part
up to 3,750,000 additional ordinary shares from the selling
shareholders to cover over-allotments at the public offering
price less the underwriting discounts and commissions set forth
on the cover page of this prospectus supplement. The
underwriters may exercise this option only to the extent the
underwriters sell more than 25,000,000 ordinary shares in this
offering. To the extent that the underwriters exercise this
option, each of the underwriters will become obligated, subject
to conditions, to purchase approximately the same percentage of
these additional ordinary shares as the number of ordinary
shares to be purchased by it in the above table bears to the
total number of ordinary shares offered by this prospectus
supplement. The selling shareholders will be obligated to sell
these additional ordinary shares to the underwriters to the
extent the option is exercised. If any additional ordinary
shares are purchased, the underwriters will offer the additional
shares on the same terms as those on which the shares are being
offered.
The underwriting discounts and commissions per share are equal
to the public offering price per ordinary share less the amount
paid by the underwriters to the selling shareholders per
ordinary share. The following table shows the underwriting
discount that the selling shareholders are to pay to the
underwriters in connection with this offering, assuming either
no exercise or full exercise of the underwriters option to
purchase additional shares described above.
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Without
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With
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Exercise of
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Exercise of
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Underwriters
|
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Underwriters
|
|
|
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Option
|
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Option
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Per share
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$
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0.34
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$
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0.34
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Total
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$
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8,500,000
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$
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9,775,000
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In addition, we and the selling shareholders estimate that the
total expenses of this offering payable by us will be
approximately $375,000. We will pay all expenses of this
offering, including expenses of the selling shareholders
pursuant to the Registration Rights Agreement described under
Description of Share Capital Registration
Rights Agreement in the accompanying prospectus, other
than the underwriting discounts and commissions attributable to
shares sold by the selling shareholders.
S-35
We and the selling shareholders have agreed to indemnify the
underwriters against some specified types of liabilities,
including liabilities under the Securities Act, and to
contribute to payments the underwriters may be required to make
in respect of any of these liabilities.
Each of the selling shareholders have agreed that, without the
prior written consent of the underwriters, they will not
directly or indirectly, (1) offer for sale, sell, pledge,
or otherwise dispose of (or enter into any transaction or device
that is designed to, or could be expected to, result in the
disposition by any person at any time in the future of) any
ordinary shares (including, without limitation, ordinary shares
that may be deemed to be beneficially owned by them in
accordance with the rules and regulations of the SEC and
ordinary shares that may be issued upon exercise of any options)
or securities convertible into or exercisable or exchangeable
for ordinary shares, (2) enter into any swap or other
derivatives transaction that transfers to another, in whole or
in part, any of the economic consequences of ownership of the
ordinary shares, (3) make any demand for or exercise any
right or file or cause to be filed a registration statement,
including any amendments thereto, with respect to the
registration of any ordinary shares or securities convertible,
exercisable or exchangeable into ordinary shares or any of our
other securities, or (4) publicly disclose the intention to
do any of the foregoing for a period of 30 days after the
date of this prospectus supplement (the
Lock-Up
Period), subject to certain exceptions. We have entered
into a similar agreement with the underwriters. Such exceptions
permit each of the selling shareholders to enter into a written
plan meeting the requirements of
Rule 10b-5-1(c)
under the Exchange Act, provided that no sales of our securities
may occur under such plan during the
Lock-Up
Period, and the transfer by certain selling shareholders of up
to approximately 187,000 shares in the aggregate for the
purposes of facilitating bona fide gifts of ordinary shares to
be made by certain officers of the general partners of such
selling shareholders. Another such exception to our
lock-up
agreement covers the issuance by us of ordinary shares in an
amount up to an aggregate of 15% of the sum of our fully-diluted
ordinary shares outstanding as of the date of the prospectus
supplement, in exchange for the assets or equity of another
entity in connection with the acquisition by us of, or joint
venture with, such entity, provided, however, that the recipient
of any such shares agrees in writing to be bound by the
lock-up
restrictions described herein. The consent of the underwriters
may be given at any time without public notice to the extent
permitted by applicable law. There are no agreements between the
underwriters and any of our securityholders or affiliates
releasing them from these
lock-up
agreements prior to the expiration of the
Lock-Up
Period.
In connection with the offering, the underwriters may purchase
and sell our ordinary shares in the open market, in accordance
with Regulation M under the Exchange Act where applicable.
These transactions may include short sales, purchases to cover
positions created by short sales and stabilizing transactions.
If the underwriters commence these activities, they may
discontinue them at any time.
Short sales involve the sale by the underwriters of a greater
number of shares than they are required to purchase in the
offering. Covered short sales are sales made in an amount not
greater than the underwriters option to purchase
additional ordinary shares from the selling shareholders in the
offering. The underwriters may close out any covered short
position by either exercising their option to purchase
additional shares or purchasing shares in the open market. In
determining the source of shares to close out the covered short
position, the underwriters will consider, among other things,
the price of shares available for purchase in the open market as
compared to the price at which they may purchase shares through
the underwriters option to purchase additional shares.
Naked short sales are any sales in excess of the option to
purchase additional shares. The underwriters must close out any
naked short position by purchasing shares in the open market. A
naked short position is more likely to be created if the
underwriters are concerned that there may be downward pressure
on the price of the shares in the open market prior to the
completion of the offering.
Stabilizing transactions consist of various bids for or
purchases of our ordinary shares made by the underwriters in the
open market prior to the completion of the offering.
Purchases to cover a short position and stabilizing
transactions, as well as other purchases by the underwriters for
their own account, may have the effect of preventing or slowing
a decline in the market price of our ordinary shares.
Additionally, these purchases, along with the imposition of the
penalty bid, may stabilize, maintain or otherwise affect the
market price of our ordinary shares. As a result, the price of
our ordinary shares may be higher than the price that might
otherwise exist in the open market. These transactions may be
effected on the Nasdaq Global Select Market, in the
over-the-counter
market or otherwise.
A prospectus supplement in electronic format may be made
available on Internet web sites maintained by one or more of the
underwriters of this offering. Other than the prospectus
supplement in electronic format, the information on any
underwriters web site and any information contained in any
other web site maintained by an underwriter is not part of the
prospectus supplement or the registration statement of which the
prospectus supplement forms a part.
S-36
The underwriters and their affiliates have, from time to time,
performed, and may in the future perform, various financial
advisory, investment banking, commercial banking and other
services for us for which they received or will receive
customary fees and expenses.
Affiliates of Deutsche Bank Securities Inc., Barclays Capital
Inc. and Citigroup Global Markets Inc. are lenders under our
credit agreement, affiliates of Barclays Capital Inc. and
Citigroup Global Markets Inc. acted as joint lead arrangers and
joint bookrunners for our credit agreement, an affiliate of
Citigroup Global Markets Inc. is administrative agent under our
credit agreement and an affiliate of Barclays Capital Inc. is
syndication agent under our credit agreement.
Stamp
Taxes
Stamp taxes will not be imposed by the United States on
investors in connection with the purchase of ordinary shares in
this offering.
There is no Singapore stamp duty payable in respect of the
issuance or holding of our ordinary shares. Singapore stamp duty
will be payable if there is an instrument of transfer executed
in Singapore or if there is an instrument of transfer executed
outside of Singapore which is received in Singapore. Under
Singapore law, stamp duty is not applicable to electronic
transfers of our shares effected on a book entry basis. We
therefore expect that no Singapore stamp duty will be payable in
respect of ordinary shares purchased by U.S. holders in
this offering assuming that they are acquired in book entry form
through the facility established by our transfer agent and
registrar. Where shares evidenced in certificated form are
transferred and an instrument of transfer is executed between
the parties, Singapore stamp duty is payable on an instrument of
transfer of the shares at the rate of S$0.20 for every S$100 or
part thereof of the consideration for, or market value of, the
shares, whichever is higher. The Singapore stamp duty is borne
by the purchaser unless there is an agreement to the contrary.
Where the instrument of transfer is executed outside of
Singapore, Singapore stamp duty must be paid within 30 days
of receipt in Singapore if the instrument of transfer is
received in Singapore.
Selling
Restrictions
European
Economic Area
In relation to each member state of the European Economic Area
that has implemented the Prospectus Directive (each, a
relevant member state), with effect from and
including the date on which the Prospectus Directive is
implemented in that relevant member state (the relevant
implementation date), an offer of securities described in
this prospectus supplement may not be made to the public in that
relevant member state other than:
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to any legal entity that is a qualified investor as defined in
the Prospectus Directive;
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to fewer than 100 or, if the relevant member state has
implemented the relevant provision of the 2010 PD Amending
Directive, 150 natural or legal persons (other than
qualified investors as defined in the Prospectus
Directive) subject to obtaining the prior consent of the
representatives; or
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in any other circumstances that do not require the publication
of a prospectus pursuant to Article 3 of the Prospectus
Directive,
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provided that no such offer of securities shall require us or
any underwriter to publish a prospectus pursuant to
Article 3 of the Prospectus Directive.
For purposes of this provision, the expression an offer of
securities to the public in any relevant member state
means the communication in any form and by any means of
sufficient information on the terms of the offer and the
securities to be offered so as to enable an investor to decide
to purchase or subscribe the securities, as the expression may
be varied in that member state by any measure implementing the
Prospectus Directive in that member state, the expression
Prospectus Directive means Directive 2003/71/EC (and
amendments thereto, including the 2010 PD Amending Directive, to
the extent implemented in the relevant member state) and
includes any relevant implementing measure in each relevant
member state, and the expression 2010 PD Amending
Directive means Directive 2010/73/EU.
We have not authorized and do not authorize the making of any
offer of securities through any financial intermediary on their
behalf, other than offers made by the underwriters with a view
to the final placement of the securities as contemplated in this
prospectus supplement. Accordingly, no purchaser of the
securities, other than each of the underwriters, is authorized
to make any further offer of the securities on behalf of us or
the underwriters.
S-37
United
Kingdom
This prospectus supplement is only being distributed to, and is
only directed at, persons in the United Kingdom that are
qualified investors within the meaning of Article 2(1)(e)
of the Prospectus Directive (Qualified Investors)
that are also (i) investment professionals falling within
Article 19(5) of the Financial Services and Markets Act
2000 (Financial Promotion) Order 2005 (the Order) or
(ii) high net worth entities, and other persons to whom it
may lawfully be communicated, falling within
Article 49(2)(a) to (d) of the Order (all such persons
together being referred to as relevant persons).
This prospectus supplement and its contents are confidential and
should not be distributed, published or reproduced (in whole or
in part) or disclosed by recipients to any other persons in the
United Kingdom. Any person in the United Kingdom that is not a
relevant persons should not act or rely on this document or any
of its contents.
Australia
No prospectus or other disclosure document (as defined in the
Corporations Act 2001 (Cth) of Australia (Corporations
Act)) in relation to the ordinary shares has been or will
be lodged with the Australian Securities & Investments
Commission (ASIC). This document has not been lodged
with ASIC and is only directed to certain categories of exempt
persons. Accordingly, if you receive this document in Australia:
(a) you confirm and warrant that you are either:
(i) a sophisticated investor under
section 708(8)(a) or (b) of the Corporations Act;
(ii) a sophisticated investor under
section 708(8)(c) or (d) of the Corporations Act and
that you have provided an accountants certificate to us
which complies with the requirements of section 708(8)(c)(i) or
(ii) of the Corporations Act and related regulations before
the offer has been made;
(iii) a person associated with the company under
section 708(12) of the Corporations Act; or
(iv) a professional investor within the meaning
of section 708(11)(a) or (b) of the Corporations Act,
and to the extent that you are unable to confirm or warrant that
you are an exempt sophisticated investor, associated person or
professional investor under the Corporations Act any offer made
to you under this document is void and incapable of
acceptance; and
(b) you warrant and agree that you will not offer any of
the ordinary shares for resale in Australia within
12 months of those ordinary shares being issued unless any
such resale offer is exempt from the requirement to issue a
disclosure document under section 708 of the Corporations
Act.
Hong
Kong
The ordinary shares may not be offered or sold in Hong Kong, by
means of any document, other than (a) to professional
investors as defined in the Securities and Futures
Ordinance (Cap. 571, Laws of Hong Kong) and any rules made under
that Ordinance or (b) in other circumstances which do not
result in the document being a prospectus as defined
in the Companies Ordinance (Cap. 32, Laws of Hong Kong) or which
do not constitute an offer to the public within the meaning of
that Ordinance. No advertisement, invitation or document
relating to the ordinary shares may be issued or may be in the
possession of any person for the purpose of the issue, whether
in Hong Kong or elsewhere, which is directed at, or the contents
of which are likely to be read by, the public in Hong Kong
(except if permitted to do so under the laws of Hong Kong) other
than with respect to the ordinary shares which are intended to
be disposed of only to persons outside Hong Kong or only to
professional investors as defined in the Securities
and Futures Ordinance (Cap. 571, Laws of Hong Kong) or any rules
made under that Ordinance.
India
This prospectus supplement has not been and will not be
registered as a prospectus with the Registrar of Companies in
India or with the Securities and Exchange Board of India. This
prospectus supplement or any other material relating to these
securities is for information purposes only and may not be
circulated or distributed, directly or indirectly, to the public
or any members of the public in India and in any event to not
more than 50 persons in India.
Further, persons into whose possession this prospectus
supplement comes are required to inform themselves about and to
observe any such restrictions. Each prospective investor is
advised to consult its advisors about the particular
consequences to it of an investment in these securities. Each
prospective investor is also advised that any
S-38
investment in these securities by it is subject to the
regulations prescribed by the Reserve Bank of India and the
Foreign Exchange Management Act and any regulations framed
thereunder.
Japan
No registration has been made under Article 4,
Paragraph 1 of the Financial Instruments and Exchange Law
of Japan (Law No. 25 of 1948, as amended)
(FIEL) in relation to the offering of the shares.
The shares are being offered in a private placement to up to 49
investors under Article 2, Paragraph 3, Item 2
iii of the FIEL.
Korea
The ordinary shares may not be offered, sold and delivered
directly or indirectly, or offered or sold to any person for
reoffering or resale, directly or indirectly, in Korea or to any
resident of Korea except pursuant to the applicable laws and
regulations of Korea, including the Korea Securities and
Exchange Act and the Foreign Exchange Transaction Law and the
decrees and regulations thereunder. The ordinary shares have not
been registered with the Financial Services Commission of Korea
for public offering in Korea. Furthermore, the ordinary shares
may not be resold to Korean residents unless the purchaser of
the ordinary shares complies with all applicable regulatory
requirements (including but not limited to government approval
requirements under the Foreign Exchange Transaction Law and its
subordinate decrees and regulations) in connection with the
purchase of the ordinary shares.
Singapore
This prospectus supplement has not been and will not be lodged
with or registered as a prospectus by the Monetary Authority of
Singapore. Accordingly, this document and any other document or
material in connection with the offer or sale, or invitation for
subscription or purchase, of the ordinary shares may not be
circulated or distributed, nor may the ordinary shares be
offered or sold, or be made the subject of an invitation for
subscription or purchase, whether directly or indirectly, to
persons in Singapore other than: (i) to an institutional
investor under Section 274 of the Securities and Futures
Act (Chapter 289) of Singapore (the SFA);
(ii) to a relevant person pursuant to Section 275(1)
of the SFA, or any person pursuant to Section 275(1A) of
the SFA, and in accordance with the conditions specified in
Section 275 of the SFA; or (iii) otherwise pursuant
to, and in accordance with the conditions of, any other
applicable provision of the SFA.
Where the ordinary shares are subscribed or purchased under
Section 275 of the SFA by a relevant person which is:
(a) a corporation (which is not an accredited investor (as
defined in Section 4A of the SFA)) the sole business of
which is to hold investments and the entire share capital of
which is owned by one or more individuals, each of whom is an
accredited investor; or
(b) a trust (where the trustee is not an accredited
investor) whose sole purpose is to hold investments and each
beneficiary of the trust is an individual who is an accredited
investor,
securities (as defined in Section 239(1) of the SFA) of
that corporation or the beneficiaries rights and interest
(howsoever described) in that trust shall not be transferable
for six months after that corporation or that trust has acquired
the ordinary shares pursuant to an offer made under
Section 275 of the SFA except:
(1) to an institutional investor under Section 274 of
the SFA or to a relevant person defined in Section 275(2)
of the SFA, or to any person arising from an offer referred to
in Section 275(1A) or Section 276(4)(i)(B) of the SFA;
(2) where no consideration is given for the
transfer; or
(3) where the transfer is by operation of law.
Taiwan
The shares may be made available to investors in Taiwan but will
not be offered or sold in Taiwan except as permitted by
applicable law of the Republic of China.
By accepting this prospectus supplement, the recipient hereof
represents and warrants that he is entitled to receive it in
accordance with the restrictions set forth above and agrees to
be bound by the limitations contained herein. Any failure to
comply with these limitations may constitute a violation of law.
S-39
LEGAL
MATTERS
Certain legal matters relating to the issuance and sale of the
securities with respect to Singapore law will be passed upon for
us by WongPartnership LLP. Certain legal matters relating to the
issuance and sale of the securities with respect to
U.S. law will be passed upon for us by Latham &
Watkins LLP, Menlo Park, California. Partners of
Latham & Watkins LLP, members of their respective
families, related persons and others have an indirect interest,
through limited partnerships that are investors in funds
affiliated with KKR, in less than 1% of our ordinary shares.
Certain legal matters in connection with this offering will be
passed upon for the underwriters by Simpson Thacher &
Bartlett LLP, Palo Alto, California, and Allen &
Gledhill LLP, Singapore with respect to Singapore Law. Certain
partners of Simpson Thacher & Bartlett LLP, members of
their respective families, related persons and others have an
indirect interest, through limited partnerships that are
investors in funds affiliated with KKR and Silver Lake, in less
than 1% of our ordinary shares.
EXPERTS
The consolidated financial statements and managements
assessment of the effectiveness of internal control over
financial reporting (which is included in Managements
Report on Internal Control over Financial Reporting)
incorporated in this prospectus supplement by reference to the
Annual Report on
Form 10-K
of Avago Technologies Limited for the year ended
October 31, 2010 have been so incorporated in reliance on
the report of PricewaterhouseCoopers LLP, an independent
registered public accounting firm, given on the authority of
said firm as experts in auditing and accounting.
WHERE YOU
CAN FIND MORE INFORMATION
This prospectus supplement and the accompanying prospectus is a
part of a registration statement on
Form S-3
that we filed with the SEC, but the registration statement
includes additional information and also attaches exhibits that
are referenced in this prospectus supplement. This prospectus
supplement does not contain all of the information set forth in
the registration statement and the exhibits and schedules
thereto. Some items are omitted in accordance with the rules and
regulations of the SEC. For further information with respect to
us and the securities offered hereby, we refer you to the
registration statement and the exhibits and schedules filed
therewith. Statements contained in this prospectus supplement as
to the contents of any contract, agreement or any other document
referred to are summaries of the material terms of the
respective contract, agreement or other document. With respect
to each of these contracts, agreements or other documents filed
as an exhibit to the registration statement, reference is made
to the exhibits for a more complete description of the matter
involved. A copy of the registration statement, and the exhibits
and schedules thereto, may be inspected without charge at the
public reference facilities maintained by the SEC at
100 F Street, N.E., Washington, D.C. 20549.
Copies of these materials may be obtained by writing to the
Public Reference Section of the SEC at 100 F Street,
N.E., Washington, D.C. 20549. Please call the SEC at
1-800-SEC-0330
for further information on the operation of the public reference
facilities. The SEC maintains a website that contains reports,
proxy and information statements and other information regarding
registrants that file electronically with the SEC. The address
of the SECs website is
http://www.sec.gov.
We are subject to the information and periodic reporting
requirements of the Securities Exchange Act of 1934, as amended,
or the Exchange Act, and, in accordance therewith, file periodic
reports, proxy statements and other information with the SEC.
Such periodic reports, proxy statements and other information
are available for inspection and copying at the public reference
room and website of the SEC referred to above. We maintain a
website at www.avagotech.com. You may access our annual report
on
Form 10-K,
quarterly reports on
Form 10-Q,
current reports on
Form 8-K,
proxy statements and amendments to those reports filed or
furnished pursuant to Section 13(a) or 15(d) of the
Exchange Act with the SEC free of charge at our website as soon
as reasonably practicable after such material is electronically
filed with, or furnished to, the SEC. The reference to our
website address does not constitute incorporation by reference
of the information contained on our website.
S-40
INCORPORATION
BY REFERENCE
The SEC allows us to incorporate by reference
information in this prospectus supplement and the accompanying
base prospectus that we have filed with it. This means that we
can disclose important information to you by referring you to
another document already on file with the SEC. The information
that we file later with the SEC will automatically update and
supersede this information.
This prospectus supplement and the accompanying base prospectus
incorporate by reference the documents listed below that we have
previously filed and any future filings we make with the SEC
under Section 13(a), 13(c), 14 or 15(d) of the
Exchange Act between the date of this prospectus supplement and
the termination of the offering (excluding any document, or
portion thereof, to the extent such document or portion thereof
is furnished and not filed):
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Annual Report on
Form 10-K
for the fiscal year ended October 31, 2010;
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Quarterly Report on
Form 10-Q
for the quarterly period ended January 30, 2011;
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Current Reports on
Form 8-K
filed with the SEC on December 2, 2010 (with respect to
Item 8.01 only), December 6, 2010, December 8,
2010, January 20, 2011, February 16, 2011 (with
respect to Item 5.02 only), March 2, 2011 and
April 1, 2011; and
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The description of our ordinary shares contained in our
Registration Statement on
Form 8-A
(Commission File
No. 001-34428),
filed with the SEC on August 3, 2009, including any
subsequent amendment or any report filed for the purpose of
updating such description.
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Any statement contained in a document incorporated by reference
or deemed incorporated by reference into this prospectus
supplement and the accompanying base prospectus will be deemed
to be modified or superseded for the purposes of this prospectus
supplement and the accompanying base prospectus to the extent
that a later statement contained in this prospectus supplement
or in any other document incorporated by reference or deemed
incorporated by reference into this prospectus supplement and
the accompanying base prospectus modifies or supersedes the
earlier statement. Any statement so modified or superseded will
not be deemed, except as so modified or superseded, to
constitute a part of this prospectus supplement or the
accompanying base prospectus.
We will provide to each person, including any beneficial owners,
to whom a prospectus supplement is delivered, a copy of the
reports and documents that have been incorporated by reference
into this prospectus supplement, at no cost. Any such request
may be made by writing or telephoning us at the following
address or phone number:
Avago Technologies Limited
Attn: Investor Relations
c/o Avago
Technologies U.S. Inc.
350 West Trimble Road, Building 90
San Jose, California 95131 U.S.A.
Telephone: +1
(408) 435-7400
These documents can also be requested through, and are available
in, the Investors section of our website, which is located at
www.avagotech.com, or as described under Where You Can
Find Additional Information above. The reference to our
website address does not constitute incorporation by reference
of the information contained on our website.
S-41
PROSPECTUS
Ordinary Shares
Debt Securities
Warrants
Rights
Purchase Contracts
Units
From time to time, we or certain selling securityholders may
offer the securities described in this prospectus separately or
together in any combination, in one or more classes or series,
in amounts, at prices and on terms that we will determine at the
time of the offering.
We will provide the specific terms of these offerings and
securities in supplements to this prospectus. You should read
carefully this prospectus, the information incorporated by
reference in this prospectus, any prospectus supplement and any
free writing prospectus before you invest. This prospectus may
not be used to offer or sell any securities unless accompanied
by a prospectus supplement.
Our ordinary shares are listed on the Nasdaq Global Select
Market under the symbol AVGO.
INVESTING IN OUR SECURITIES INVOLVES A HIGH DEGREE OF RISK.
RISKS ASSOCIATED WITH AN INVESTMENT IN OUR SECURITIES WILL BE
DESCRIBED IN THE APPLICABLE PROSPECTUS SUPPLEMENT AND/OR CERTAIN
OF OUR FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION, AS
DESCRIBED UNDER RISK FACTORS ON PAGE 1.
We may offer and sell the securities directly, through agents we
select from time to time or to or through underwriters or
dealers we select, or through a combination of these methods. In
addition, certain selling securityholders may offer and sell our
securities from time to time, together or separately. We will
provide specific information about any selling securityholders
in one or more supplements to this prospectus. If we or the
selling securityholders use any agents, underwriters or dealers
to sell the securities, we will name them and describe their
compensation in a prospectus supplement. The price to the public
of those securities and the net proceeds we or any selling
securityholders expect to receive from that sale will also be
set forth in a prospectus supplement.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
securities or determined if this prospectus is truthful or
complete. Any representation to the contrary is a criminal
offense.
The date of this prospectus is August 6, 2010.
TABLE OF
CONTENTS
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Important
Notice About the Information Presented In This
Prospectus
You should rely only on the information we have provided or
incorporated by reference in this prospectus or any prospectus
supplement. We have not authorized anyone to provide you with
different information. If anyone provides you with different or
inconsistent information, you should not rely on it. This
prospectus does not constitute an offer to sell, or a
solicitation of an offer to purchase, the securities offered by
this prospectus in any jurisdiction to or from any person to
whom or from whom it is unlawful to make such offer or
solicitation of an offer in such jurisdiction. You should assume
that the information in this prospectus or any prospectus
supplement is accurate only as of the date on the front of the
document and that any information we have incorporated by
reference is accurate only as of the date of the document
incorporated by reference, regardless of the time of delivery of
this prospectus or any sale of a security. Our business,
financial condition and results of operations may have changed
since that date.
i
ABOUT
THIS PROSPECTUS
This prospectus is part of a registration statement that we
filed with the Securities and Exchange Commission, or the SEC,
using a shelf registration process. Under this shelf
registration process, we are registering an unspecified amount
of each class of the securities described in this prospectus,
and we may sell any combination of the securities described in
this prospectus in one or more offerings. This prospectus
provides you with a general description of the securities we or
any selling securityholder may offer. Each time we use this
prospectus to offer securities, we will provide a prospectus
supplement that will contain specific information about the
terms of that offering. To the extent that this prospectus is
used by any securityholder to resell any securities, information
with respect to the securityholder and the terms of the
securities being offered will be contained in a prospectus
supplement. Any prospectus supplement may also add, update or
change information contained in this prospectus or in documents
we have incorporated by reference into this prospectus. If there
is any inconsistency between the information in this prospectus
and any applicable prospectus supplement, you should rely on the
information in the prospectus supplement. This prospectus,
together with the applicable prospectus supplements, any
applicable free writing prospectuses and the documents
incorporated by reference into this prospectus, includes all
material information relating to the securities we may offer or
any selling securityholder may offer. Please carefully read both
this prospectus and the applicable prospectus supplement and any
applicable free writing prospectus, together with the documents
incorporated by reference into this prospectus described below
under the heading Where You Can Find More
Information, before making a decision to purchase any of
our securities.
The prospectus supplement will describe: the specific terms of
the securities offered, any initial public offering price, the
price paid to us for the securities, the net proceeds to us, the
manner of distribution and any underwriting compensation, and
the other specific material terms related to the offering of the
securities. The prospectus supplement may also contain
information, where applicable, about material United States
federal income tax considerations relating to the securities.
This prospectus contains summaries of certain provisions
contained in some of the documents described herein, but
reference is made to the actual documents for complete
information. All of the summaries are qualified in their
entirety by the actual documents. Copies of the documents
referred to herein have been filed, or will be filed or
incorporated by reference as exhibits to the registration
statement of which this prospectus is a part, and you may obtain
copies of those documents as described below under Where
You Can Find More Information.
This prospectus has not been and will not be registered as a
prospectus with the Monetary Authority of Singapore.
Accordingly, this prospectus and any other document or material
in connection with the offer or sale, or invitation for the
subscription or purchase, of any of the securities registered
hereby may not be circulated or distributed, nor may any of the
securities registered hereby be offered or sold, or be made the
subject of an invitation for subscription or purchase, whether
directly or indirectly, to persons in Singapore.
As used in this prospectus, Avago,
Company, we, our,
us or Successor refer to Avago
Technologies Limited and its subsidiaries on a consolidated
basis, unless otherwise indicated. As used in this prospectus,
Predecessor refers to the Semiconductor Products
Group, or SPG, of Agilent Technologies, Inc., or Agilent.
ii
RISK
FACTORS
Investing in our securities involves risks. Before you make a
decision to buy our securities, in addition to the risks and
uncertainties discussed below under Special Note Regarding
Forward-Looking Statements, you should carefully consider
the specific risks set forth under the caption Risk
Factors in any applicable prospectus supplement or free
writing prospectus and under the caption Risk
Factors in our filings with the SEC pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Securities
Exchange Act of 1934, as amended, or the Exchange Act,
incorporated by reference herein
and/or
included in any prospectus supplement, before making an
investment decision. Additionally, the risks and uncertainties
discussed in this prospectus or in any document incorporated by
reference into this prospectus are not the only risks and
uncertainties that we face, and our business, financial
condition, liquidity and results of operations and the market
price of any securities we may sell could be materially
adversely affected by other matters that are not known to us or
that we currently do not consider to be material.
WHERE YOU
CAN FIND MORE INFORMATION
This prospectus is a part of a registration statement on
Form S-3
that we filed with the SEC, but the registration statement
includes additional information and also attaches exhibits that
are referenced in this prospectus. This prospectus does not
contain all of the information set forth in the registration
statement and the exhibits and schedules thereto. Some items are
omitted in accordance with the rules and regulations of the SEC.
For further information with respect to us and the securities
offered hereby, we refer you to the registration statement and
the exhibits and schedules filed therewith. Statements contained
in this prospectus as to the contents of any contract, agreement
or any other document referred to are summaries of the material
terms of the respective contract, agreement or other document.
With respect to each of these contracts, agreements or other
documents filed as an exhibit to the registration statement,
reference is made to the exhibits for a more complete
description of the matter involved. A copy of the registration
statement, and the exhibits and schedules thereto, may be
inspected without charge at the public reference facilities
maintained by the SEC at 100 F Street, N.E.,
Washington, D.C. 20549. Copies of these materials may be
obtained by writing to the Public Reference Section of the SEC
at 100 F Street, N.E., Washington, D.C. 20549.
Please call the SEC at
1-800-SEC-0330
for further information on the operation of the public reference
facilities. The SEC maintains a website that contains reports,
proxy and information statements and other information regarding
registrants that file electronically with the SEC. The address
of the SECs website is
http://www.sec.gov.
We are subject to the information and periodic reporting
requirements of the Exchange Act and, in accordance therewith,
file periodic reports, proxy statements and other information
with the SEC. Such periodic reports, proxy statements and other
information are available for inspection and copying at the
public reference room and website of the SEC referred to above.
We maintain a website at www.avagotech.com. You may access our
annual report on
Form 10-K,
quarterly reports on
Form 10-Q,
current reports on
Form 8-K,
proxy statements and amendments to those reports filed or
furnished pursuant to Section 13(a) or 15(d) of the
Exchange Act with the SEC free of charge at our website as soon
as reasonably practicable after such material is electronically
filed with, or furnished to, the SEC. The reference to our
website address does not constitute incorporation by reference
of the information contained on our website.
INCORPORATION
BY REFERENCE
The SEC allows us to incorporate by reference
information in this prospectus that we have filed with it. This
means that we can disclose important information to you by
referring you to another document already on file with the SEC.
The information that we file later with the SEC will
automatically update and supersede this information.
This prospectus incorporates by reference the documents listed
below that we have previously filed with the SEC and any future
filings we make with the SEC under Section 13(a), 13(c), 14
or 15(d) of the Exchange Act
1
between the date of this prospectus and the termination of the
offering (excluding any document, or portion thereof, to the
extent such document or portion thereof is furnished and not
filed):
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Annual Report on
Form 10-K
for the fiscal year ended November 1, 2009, filed with the
SEC on December 15, 2009 and Amendment to Annual Report on
Form 10-K/A,
filed with the SEC on January 15, 2010;
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Quarterly Report on
Form 10-Q
for the quarterly period ended January 31, 2010, filed with
the SEC on March 4, 2010;
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Quarterly Report on
Form 10-Q
for the quarterly period ended May 2, 2010, filed with the
SEC on June 3, 2010;
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Current Reports on
Form 8-K
filed with the SEC on December 7, 2009 (as amended by the
Current Report on
Form 8-K/A
filed on January 25, 2010), March 26, 2010,
April 1, 2010, April 19, 2010 and July 2,
2010; and
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The description of our ordinary shares contained in our
Registration Statement on
Form 8-A
(Commission File
No. 001-34428),
filed with the SEC on August 3, 2009, including any
subsequent amendment or any report filed for the purpose of
updating such description.
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Any statement contained in a document incorporated by reference
or deemed incorporated by reference into this prospectus will be
deemed to be modified or superseded for the purposes of this
prospectus to the extent that a later statement contained in
this prospectus or in any other document incorporated by
reference or deemed incorporated by reference into this
prospectus modifies or supersedes the earlier statement. Any
statement so modified or superseded will not be deemed, except
as so modified or superseded, to constitute a part of this
prospectus.
We will provide to each person, including any beneficial owners,
to whom a prospectus is delivered, a copy of the reports and
documents that have been incorporated by reference into this
prospectus, at no cost. Any such request may be made by writing
or telephoning us at the following address or phone number:
Avago
Technologies Limited
Attn: Investor Relations
c/o Avago
Technologies U.S. Inc.
350 West Trimble Road, Building 90
San Jose, California 95131 U.S.A.
Telephone: +1
(408) 435-7400
These documents can also be requested through, and are available
in, the Investors section of our website, which is located at
www.avagotech.com, or as described under Where You Can
Find Additional Information above. The reference to our
website address does not constitute incorporation by reference
of the information contained on our website.
SPECIAL
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus and documents incorporated by reference into
this prospectus and any prospectus supplement or free writing
prospectus may contain forward-looking statements
within the meaning of the federal securities laws, which involve
risks and uncertainties. You can identify forward-looking
statements because they contain words such as
believe, expect, may,
will, should, seek,
approximately, intend, plan,
estimate, or anticipate or similar
expressions that concern our strategy, plans or intentions. All
statements other than statements of historical fact could be
deemed forward-looking, including, but not limited to, any
projections of financial information; any statements about
historical results that may suggest trends for our business; any
statements of the plans, strategies and objectives of management
for future operations; any statements of expectation or belief
regarding future events, technology developments, or
enforceability of our intellectual property rights; and any
statements of assumptions underlying any of the foregoing. All
statements we make relating to estimated and projected earnings,
margins, costs, expenditures, cash flows, growth rates and
financial results are forward-looking statements. These
forward-looking statements are based on current expectations,
2
estimates, forecasts and projections of future Company or
industry performance based on managements judgment,
beliefs, current trends and market conditions and involve risks
and uncertainties that may cause actual results to differ
materially from those contained in the forward-looking
statements. We derive most of our forward-looking statements
from our operating budgets and forecasts, which are based upon
many detailed assumptions. While we believe that our assumptions
are reasonable, we caution that it is very difficult to predict
the impact of known factors, and, of course, it is impossible
for us to anticipate all factors that could affect our actual
results. Accordingly, we caution you not to place undue reliance
on these statements. Important factors that could cause actual
results to differ materially from our expectations are disclosed
under Risk Factors, elsewhere in this prospectus or
any prospectus supplement or free writing prospectus, or
incorporated by reference into this prospectus or any prospectus
supplement or free writing prospectus, including, without
limitation, in conjunction with the forward-looking statements
included in this prospectus and any prospectus supplement or
free writing prospectus. Some of the factors that we believe
could affect our results include:
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the recent economic downturn and financial crisis and their
impact on our business, results of operations, and financial
condition;
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cyclicality in the semiconductor industry or in our target
markets;
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quarterly and annual fluctuations in operating results;
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our ability to adapt to technological changes in the
semiconductor industry;
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our dependence on contract manufacturing and outsourced supply
chain and our ability to improve our cost structure through our
manufacturing outsourcing program;
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inability to continuously improve manufacturing efficiency and
quality;
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our competitive performance and ability to continue achieving
design wins with our customers;
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our ability to protect our intellectual property, defending
against third-party intellectual property claims and associated
increases in litigation expenditures;
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investment in research and development;
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departure of key senior managers and the ability to retain and
attract key personnel;
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any expenses or reputational damage associated with resolving
customer product and warranty claims and product recalls;
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loss of one or more of our significant customers;
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our increased dependence on outsourced service providers for
certain key business services and their ability to execute to
our requirements;
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risks relating to the transaction of business internationally;
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currency fluctuations;
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the effects of war, terrorism, natural disasters or other
catastrophic events;
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prolonged disruptions of our manufacturing facilities;
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our ability to maintain tax concessions in certain jurisdictions;
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changes in tax laws;
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our ability to achieve the growth prospects and synergies
expected from our acquisitions and delays and challenges
associated with integrating acquired companies with our existing
businesses;
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the effects of government regulation on our business;
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dependence on and risks associated with distributors of our
products;
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our ability to generate cash sufficient to fund our research and
development, capital expenditures and other business needs and
to service our debt;
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our indebtedness;
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certain covenants in our debt documents; and
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other events and trends on a national, regional and global
scale, including those of a political, economic, business,
competitive and regulatory nature.
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All of the forward-looking statements are qualified in their
entirety by reference to the factors listed above and those
discussed under the heading Risk Factors in this
prospectus and any accompanying prospectus supplement or free
writing prospectus
and/or in
our most recent annual report on
Form 10-K,
Item 1A under the heading Risk Factors and
subsequent quarterly reports on
Form 10-Q
and in our other filings with the SEC that are incorporated by
reference in this prospectus or any accompanying prospectus
supplement. In addition, there may be other factors of which we
are not currently aware that may affect matters discussed in the
forward-looking statements, and may also cause actual results to
differ materially from those discussed. All forward-looking
statements are based on information currently available to us.
All of our forward-looking statements, including those included
and incorporated by reference in this prospectus and any
accompanying prospectus supplement, are qualified in their
entirety by this statement.
We caution you that the foregoing list of important factors may
not contain all of the material factors that are important to
you. In addition, in light of these risks and uncertainties, the
matters referred to in the forward-looking statements contained
in this prospectus or any prospectus supplement or incorporated
by reference into this prospectus or any prospectus supplement
may not in fact occur. We undertake no obligation to publicly
update or revise any forward-looking statement as a result of
new information, future events or otherwise, except as otherwise
required by law.
You should carefully read this prospectus, any prospectus
supplement, any free writing prospectus and the documents
incorporated by reference in their entirety. They contain
information that you should consider when making your investment
decision.
ENFORCEMENT
OF CIVIL LIABILITIES UNDER
UNITED STATES FEDERAL SECURITIES LAWS
We are incorporated under the laws of the Republic of Singapore,
and certain of our officers and directors are or will be
residents outside the United States. Moreover, a majority of our
consolidated assets are located outside the United States.
Although we are incorporated outside the United States, we have
agreed to accept service of process in the United States through
our agent designated for that purpose. Nevertheless, since a
majority of the consolidated assets owned by us are located
outside the United States, any judgment obtained in the
United States against us may not be collectible within the
United States. There is no treaty between the United States and
Singapore providing for the reciprocal recognition and
enforcement of judgments in civil and commercial matters and a
final judgment for the payment of money rendered by any federal
or state court in the United States based on civil liability,
whether or not predicated solely upon the federal securities
laws, would, therefore, not be automatically enforceable in
Singapore. There is doubt whether a Singapore court may impose
civil liability on us or our directors and officers who reside
in Singapore in a suit brought in the Singapore courts against
us or such persons with respect to a violation solely of the
federal securities laws of the United States, unless the facts
surrounding such a violation would constitute or give rise to a
cause of action under Singapore law. Consequently, it may be
difficult for investors to enforce against us, our directors or
our officers in Singapore judgments obtained in the United
States which are predicated upon the civil liability provisions
of the federal securities laws of the United States.
4
OUR
COMPANY
We are a leading designer, developer and global supplier of a
broad range of analog semiconductor devices with a focus on
III-V based products. We differentiate ourselves through our
high performance design and integration capabilities. III-V
semiconductor materials have higher electrical conductivity,
enabling faster speeds and tend to have better performance
characteristics than conventional silicon in applications such
as radio frequency, or RF, and optoelectronics. III-V refers to
elements from those groups in the periodic table of chemical
elements, and examples of these materials are gallium arsenide
(GaAs), gallium nitride (GaN) and indium phosphide (InP). Our
product portfolio is extensive and includes over 6,500 products
in four primary target markets: wireless communications, wired
infrastructure, industrial and automotive electronics, and
consumer and computing peripherals. Applications for our
products in these target markets include cellular phones,
consumer appliances, data networking and telecommunications
equipment, enterprise storage and servers, factory automation,
displays, optical mice and printers.
We have an almost
50-year
history of innovation dating back to our origins within
Hewlett-Packard Company. Over the years, we have assembled a
large team of analog design engineers, and we maintain design
and product development engineering resources around the world.
Our locations include two design centers in the United States,
five in Asia and four in Europe. We have developed an extensive
portfolio of intellectual property that currently includes more
than 5,000 U.S. and foreign patents and patent applications.
We have a diversified and well-established customer base of
approximately 40,000 end customers which we serve through our
multi-channel sales and fulfillment system. We distribute most
of our products through our broad distribution network, and a
significant portion of our sales are to two of the largest
global electronic components distributors, Avnet, Inc. and Arrow
Electronics, Inc. We also have a direct sales force focused on
supporting large original equipment manufacturers, or OEMs. For
the year ended November 1, 2009, our top 10 customers,
which included four distributors, collectively accounted for 60%
of our net revenue. During the six months ended May 2,
2010, our top 10 customers, which included five distributors,
collectively accounted for 58% of our net revenue.
We focus on maintaining an efficient global supply chain and a
variable, low-cost operating model. Accordingly, we have
outsourced a majority of our manufacturing operations. We have
over 40 years of operating history in Asia, where
approximately 60% of our employees are located and where we
produce and source the majority of our products. Our presence in
Asia places us in close proximity to many of our customers and
at the center of worldwide electronics manufacturing.
Avago Technologies Limited was incorporated under the laws of
the Republic of Singapore in August 2005. Our Singapore company
registration number is 200510713C. The address of our registered
office and our principal executive offices is 1 Yishun Avenue 7,
Singapore 768923, and our telephone number is +65-6755-7888. We
are the successor to the Semiconductor Products Group of
Agilent, which we acquired on December 1, 2005 in a
transaction that we refer to in this prospectus as the SPG
Acquisition. All of our operations are conducted through our
various subsidiaries, which are organized and operated according
to the laws of their country of incorporation, and consolidated
by Avago Technologies Limited.
Our website address is www.avagotech.com. The information on, or
accessible through, our website is not part of this prospectus.
5
RATIO OF
EARNINGS TO FIXED CHARGES
(in millions, except ratio data)
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Predecessor
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Company
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|
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|
|
|
|
|
|
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Six
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One Month
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|
Months
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Year Ended
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Ended
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Year Ended
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Ended
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October 31,
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November 30,
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October 31,
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October 31,
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November 2,
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November 1,
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May 2,
|
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|
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2005
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|
|
2005
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|
|
|
2006
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|
|
2007
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|
|
2008
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|
|
2009
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|
|
2010
|
|
Fixed charges(1)
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Interest expense
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$
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|
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$
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|
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|
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$
|
121
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|
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$
|
105
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|
|
$
|
82
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|
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$
|
73
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|
|
$
|
18
|
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Amortization of debt issuance costs
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|
|
|
|
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|
|
|
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22
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4
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|
|
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4
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|
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4
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|
|
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1
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Portion of rental expense representative of interest(2)
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6
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|
|
1
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|
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4
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|
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3
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4
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4
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|
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2
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Total fixed charges
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$
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6
|
|
|
$
|
1
|
|
|
|
$
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147
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|
|
$
|
112
|
|
|
$
|
90
|
|
|
$
|
81
|
|
|
$
|
21
|
|
Earnings
|
|
|
|
|
|
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|
|
|
|
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|
|
|
|
|
|
|
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|
|
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|
|
|
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Income (loss) from continuing operations before income taxes
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$
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14
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|
|
$
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(23
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)
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$
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(225
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)
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|
$
|
(212
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)
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|
$
|
60
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|
|
$
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(36
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)
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$
|
141
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Fixed charges per above
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|
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6
|
|
|
|
1
|
|
|
|
|
147
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|
|
|
112
|
|
|
|
90
|
|
|
|
81
|
|
|
|
21
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total earnings
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|
$
|
20
|
|
|
$
|
(22
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)
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|
|
$
|
(78
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)
|
|
$
|
(100
|
)
|
|
$
|
150
|
|
|
$
|
45
|
|
|
$
|
162
|
|
Deficiency of earnings to fixed charges
|
|
$
|
|
|
|
$
|
(23
|
)
|
|
|
$
|
(225
|
)
|
|
$
|
(212
|
)
|
|
$
|
|
|
|
$
|
(36
|
)
|
|
$
|
|
|
Ratio of earnings to fixed charges(3)
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|
|
3.3
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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1.7
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|
|
|
|
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|
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7.7
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|
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|
|
(1) |
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For purposes of computing this ratio of earnings to fixed
charges, fixed charges consist of interest expense
on all indebtedness plus amortization of debt issuance costs and
an estimate of interest expense within rental expense.
Earnings consist of pre-tax income (loss) from
continuing operations plus fixed charges. |
|
(2) |
|
The Company uses one-third of rental expense as an estimation of
the interest factor on its rental expense. |
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(3) |
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Earnings were insufficient to cover fixed charges by
$23 million, $225 million, $212 million, and
$36 million for the one month ended November 30, 2005,
the fiscal years ended October 31, 2006, October 31,
2007 and November 1, 2009, respectively. |
USE OF
PROCEEDS
Unless otherwise provided in a prospectus supplement, we intend
to use the net proceeds from the sale of our securities under
this prospectus for our general corporate purposes. We will not
receive any of the proceeds from sales of securities by selling
securityholders, if any, pursuant to this prospectus.
DESCRIPTION
OF SHARE CAPITAL
General
As of May 2, 2010, we had:
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|
|
|
|
238,586,390 ordinary shares outstanding held by approximately
52 shareholders of record; and
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22,006,795 ordinary shares issuable upon exercise of outstanding
options.
|
The following description of our share capital, together with
the additional information we include in any applicable
prospectus supplement, summarizes the material terms and
provisions of the ordinary shares that we may offer from time to
time pursuant to this prospectus. While the terms we have
summarized below will apply generally
6
to any future ordinary shares that we may offer, we will
describe the particular terms of any offering in more detail in
the applicable prospectus supplement. The following description
of our share capital and provisions of our memorandum and
articles of association are summaries and are qualified by
reference to the memorandum and articles of association, copies
of which have been previously filed with the SEC.
Ordinary
Shares
We currently have only one class of issued shares, which have
identical rights in all respects and rank equally with one
another. Our ordinary shares have no par value and there is no
concept of authorized share capital under Singapore law. All
shares presently issued are fully paid and existing shareholders
are not subject to any calls on shares. Although Singapore law
does not recognize the concept of non-assessability
with respect to newly-issued shares, we note that any purchaser
of our shares who has fully paid up all amounts due with respect
to such shares will not be subject under Singapore law to any
personal liability to contribute to the assets or liabilities of
our company in such purchasers capacity solely as a holder
of such shares. We believe that this interpretation is
substantively consistent with the concept of
non-assessability under most, if not all,
U.S. state corporations laws. All shares are in registered
form. We cannot, except in the circumstances permitted by the
Singapore Companies Act, grant any financial assistance for the
acquisition or proposed acquisition of our own shares.
There is a provision in our articles of association which
enables us to issue shares with preferential, deferred,
qualified or other special rights, privileges, conditions or
such restrictions, whether in regard to dividend, voting, return
of capital, redemption or otherwise, as our directors may deem
fit with respect to additional classes of shares, subject to the
provisions of the Singapore Companies Act, our articles of
association and any special rights previously conferred on the
holders of any existing shares or class of shares. For more
information, see Preference Shares.
New
Shares
Under Singapore law and our articles of association, new shares
may be issued only with the prior approval of our shareholders
in a general meeting. General approval may be sought from our
shareholders in a general meeting for the issue of shares.
Approval, if granted, will lapse at the earlier of:
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the conclusion of the next annual general meeting;
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the expiration of the period within which the next annual
general meeting is required by law to be held (i.e., within
15 months from the last annual general meeting); or
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the subsequent revocation or modification of approval by our
shareholders acting at a duly noticed and convened meeting.
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At our annual general meeting on March 31, 2010, our
shareholders approved and provided our board of directors with
general authority to allot and issue new ordinary shares in the
Companys capital without further shareholder action. This
general authority includes the authority, among other matters,
to make or grant offers, agreements, options or other
instruments requiring the issuance of ordinary shares (including
the grant of awards or options pursuant to the Companys
equity-based incentive plans in effect as at March 31, 2010
and the creation and issuance of warrants, debentures or other
instruments convertible into ordinary shares), which authority
shall continue in effect until the earlier of the conclusion of
our 2011 annual general meeting of shareholders or the
expiration of the period within which our 2011 annual general
meeting of shareholders is required by law to be held. Subject
to this, the provisions of the Singapore Companies Act, our
articles of association and the rules of the Nasdaq Global
Select Market, or Nasdaq, the directors control the allotment
and issuance of all new ordinary shares and may issue new
ordinary shares to such persons on such terms and conditions and
with the rights and restrictions as they may think fit to impose.
Preference
Shares
Our articles of association provide that we may, subject to the
prior approval in a general meeting of our shareholders, issue
shares of a different class with preferential, deferred,
qualified or other special rights, privileges or conditions as
our board of directors may determine. Under Singapore law, our
preference shareholders will have
7
the right to attend any general meeting and in a poll at such
general meeting, to have at least one vote for every preference
share held:
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upon any resolution concerning the
winding-up
of our company;
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upon any resolution which varies the rights attached to such
preference shares; or
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when the dividends to be paid on our preference shares are more
than twelve months in arrears, for the period they remain unpaid.
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We may, subject to the prior approval in a general meeting of
our shareholders, issue preference shares which are, at our
option, subject to redemption, provided that such preference
shares may not be redeemed out of capital unless:
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all the directors have made a solvency statement in relation to
such redemption; and
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|
we have lodged a copy of the statement with the Singapore
Registrar of Companies.
|
Further, the shares must be fully
paid-up
before they are redeemed.
Transfer
of Ordinary Shares
Subject to applicable securities laws in relevant jurisdictions
and our articles of association, our ordinary shares are freely
transferable. Shares may be transferred by a duly signed
instrument of transfer in any usual or common form or in a form
acceptable to the Company. The directors may in their discretion
decline to register any transfer of shares on which we have a
lien. The directors may also decline to register any transfer
unless, among other things, evidence of payment of any stamp
duty payable with respect to the transfer is provided together
with other evidence of ownership and title as the directors may
require. We will replace lost or destroyed certificates for
shares upon notice to us and upon, among other things, the
applicant furnishing evidence and indemnity as the directors may
require and the payment of all applicable fees.
Election
and Re-election of Directors
Under our articles of association, our board of directors may
appoint any person to be a director as an additional director or
to fill a casual vacancy, provided that any person so appointed
shall hold office only until the next annual general meeting,
and shall then be eligible for re-election.
Under our articles of association, no person other than a
director retiring at a general meeting is eligible for
appointment as a director at any general meeting, without the
recommendation of the Board for election, unless (a) in the
case of a member or members who in aggregate hold(s) more than
fifty percent of the total number of our issued and
paid-up
shares (excluding treasury shares), not less than ten days, or
(b) in the case of a member or members who in aggregate
hold(s) more than five percent of the total number of our issued
and paid-up
shares (excluding treasury shares), not less than 120 days,
before the date of the notice provided to members in connection
with the general meeting, a written notice signed by such member
or members (other than the person to be proposed for
appointment) who (i) are qualified to attend and vote at
the meeting for which such notice is given, and (ii) have
held shares representing the prescribed threshold in (a) or
(b) above, for a continuous period of at least one year
prior to the date on which such notice is given, is lodged at
our registered office. Such a notice must also include the
consent of the person nominated.
Shareholders
Meetings
We are required to hold an annual general meeting each year and
not more than 15 months after the holding of the last
preceding annual general meeting. The directors may convene an
extraordinary general meeting whenever they think fit and they
must do so upon the written request of shareholders representing
not less than one-tenth of the total voting rights of all
shareholders. In addition, two or more shareholders holding not
less than one-tenth of our total number of issued shares
(excluding our treasury shares) may call a meeting of our
shareholders.
Unless otherwise required by law or by our articles of
association, voting at general meetings is by ordinary
resolution, requiring the affirmative vote of a majority of the
shares present in person or represented by proxy at the
8
meeting and entitled to vote on the resolution. An ordinary
resolution suffices, for example, for appointments of directors.
A special resolution, requiring an affirmative vote of not less
than three-fourths of the shares present in person or
represented by proxy at the meeting and entitled to vote on the
resolution, is necessary for certain matters under Singapore
law, such as an alteration of our articles of association.
Voting
Rights
Voting at any meeting of shareholders is by poll. On a poll
every shareholder who is present in person or by proxy or by
attorney, or in the case of a corporation, by a representative,
has one vote for every share held by such shareholder.
Dividends
To date, we have not declared any cash dividends on our ordinary
shares. However, our board of directors has adopted a dividend
policy authorizing the Company to pay a quarterly cash dividend
not to exceed $0.07 per ordinary share, per quarter, with the
declaration and payment of such dividend to commence no earlier
than the first quarter of the fiscal year ending
October 30, 2011. The actual declaration and payment of any
such cash dividends will be at the discretion of, and subject to
the further approval by, our board of directors and will depend
upon such factors as our earnings levels, capital requirements,
contractual restrictions, cash position, overall financial
condition and any other factors deemed relevant by our board of
directors. The payment of any dividends is also subject to there
being sufficient distributable profits out of which dividends
can be declared, as well as the other constraints and factors
discussed below.
The payment of cash dividends on ordinary shares is restricted
under the terms of the agreements governing our indebtedness,
applicable law and our corporate structure. Pursuant to
Singapore law and our articles of association, no dividends may
be paid except out of our profits. Also, because we are a
holding company, our ability to pay cash dividends on our
ordinary shares may be limited by restrictions on our ability to
obtain sufficient funds through dividends from subsidiaries,
including restrictions under the terms of the agreements
governing our indebtedness.
Bonus and
Rights Issues
Pursuant to the general authority granted to our board of
directors at our 2010 annual general meeting of shareholders,
our board of directors may, without further shareholder approval:
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|
|
|
|
capitalize any reserves or profits and distribute the same as
fully paid bonus ordinary shares to shareholders in proportion
to their shareholdings;
|
|
|
|
issue bonus shares to participants of any share incentive or
option scheme; or plan implemented by us and approved by our
shareholders, in such manner and on such terms as our board of
directors may think fit; and
|
|
|
|
issue rights to take up additional shares to shareholders in
proportion to their shareholdings, with such rights being
subject to any conditions attached to such issue and the
regulations of the Nasdaq.
|
Takeovers
The Singapore Code on Take-overs and Mergers regulates, among
other things, the acquisition of ordinary shares of
Singapore-incorporated public companies. Any person acquiring an
interest, whether by a series of transactions over a period of
time or not, either on their own or together with parties acting
in concert with such person, in 30% or more of our voting
shares, or, if such person holds, either on their own or
together with parties acting in concert with such person,
between 30% and 50% (both amounts inclusive) of our voting
shares, and if such person (or parties acting in concert with
such person) acquires additional voting shares representing more
than 1% of our voting shares in any six-month period, must,
except with the consent of the Securities Industry Council in
Singapore, extend a mandatory takeover offer for the remaining
voting shares in accordance with the provisions of the Singapore
Code on Take-overs and Mergers.
9
Parties acting in concert comprise individuals or
companies who, pursuant to an agreement or understanding
(whether formal or informal), cooperate, through the acquisition
by any of them of shares in a company, to obtain or consolidate
effective control of that company. Certain persons are presumed
(unless the presumption is rebutted) to be acting in concert
with each other. They are as follows:
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|
|
a company and its related companies, the associated companies of
any of the company and its related companies, companies whose
associated companies include any of these companies and any
person who has provided financial assistance (other than a bank
in the ordinary course of business) to any of the foregoing for
the purchase of voting rights;
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|
|
a company and its directors (including their close relatives,
related trusts and companies controlled by any of the directors,
their close relatives and related trusts);
|
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|
|
a company and its pension funds and employee share schemes;
|
|
|
|
a person with any investment company, unit trust or other fund
whose investment such person manages on a discretionary basis
but only in respect of the investment account which such person
manages;
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|
|
a financial or other professional adviser, including a
stockbroker, and its clients in respect of shares held by the
adviser and persons controlling, controlled by or under the same
control as the adviser and all the funds managed by the adviser
on a discretionary basis, where the shareholdings of the adviser
and any of those funds in the client total 10% or more of the
clients equity share capital;
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|
directors of a company (including their close relatives, related
trusts and companies controlled by any of such directors, their
close relatives and related trusts) which is subject to an offer
or where the directors have reason to believe a bona fide offer
for the company may be imminent;
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|
partners; and
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|
an individual and such persons close relatives, related
trusts, any person who is accustomed to act in accordance with
such persons instructions and companies controlled by the
individual, such persons close relatives, related trusts
or any person who is accustomed to act in accordance with such
persons instructions and any person who has provided
financial assistance (other than a bank in the ordinary course
of business) to any of the foregoing for the purchase of voting
rights.
|
A mandatory offer must be in cash or be accompanied by a cash
alternative at not less than the highest price paid by the
offeror or parties acting in concert with the offeror during the
offer period and within the six months preceding the acquisition
of shares that triggered the mandatory offer obligation.
Under the Singapore Code on Take-overs and Mergers, where
effective control of a company is acquired or consolidated by a
person, or persons acting in concert, a general offer to all
other shareholders is normally required. An offeror must treat
all shareholders of the same class in an offeree company
equally. A fundamental requirement is that shareholders in the
company subject to the takeover offer must be given sufficient
information, advice and time to consider and decide on the
offer. These legal requirements may impede or delay a takeover
of our company by a third-party.
We may submit an application to the Securities Industry Council
of Singapore for a waiver from the Singapore Code on Take-overs
and Mergers so that the Singapore Code on Take-overs and Mergers
will not apply to our company for so long as we are not listed
on a securities exchange in Singapore. We will make an
appropriate announcement if we submit the application and when
the result of the application is known.
Liquidation
or Other Return of Capital
On a
winding-up
or other return of capital, subject to any special rights
attaching to any other class of shares, holders of ordinary
shares will be entitled to participate in any surplus assets in
proportion to their shareholdings.
10
Limitations
on Rights to Hold or Vote Ordinary Shares
Except as discussed above under
Takeovers, there are no limitations
imposed by the laws of Singapore or by our articles of
association on the right of non-resident shareholders to hold or
vote ordinary shares.
Second
Amended and Restated Shareholder Agreement
Investors, to which we refer to in this prospectus as the Equity
Investors, invested approximately $1,300 million in our
business as part of the SPG Acquisition. In connection with the
closing of the SPG Acquisition, we entered into a shareholder
agreement with the Equity Investors, other than members of
management, who are party to separate agreements. In connection
with our initial public offering, or IPO, we and the Equity
Investors amended and restated the shareholder agreement to
delete or curtail provisions that became inoperative or
unnecessary upon us becoming a public company. Set forth below
is a description of the Second Amended and Restated Shareholder
Agreement, referred to in this prospectus as the Shareholder
Agreement.
Board Composition. The Shareholder Agreement
provides that our board of directors must consist of eleven
members unless otherwise agreed upon by investment funds
affiliated with Kohlberg Kravis Roberts & Co., or KKR,
and investment funds affiliated with Silver Lake Partners, or
Silver Lake, and that, subject to election by our shareholders
at each annual general meeting, certain of our shareholders have
the right to designate director nominees to our board of
directors as follows:
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|
|
three designees of KKR, for so long as KKR and its affiliates
either continue to own, directly or indirectly, at least 24% of
our outstanding ordinary shares or have not transferred any
shares to an unaffiliated third-party, provided that KKR has the
right to designate two directors for so long as KKR and its
affiliates continue to own, directly or indirectly, at least 15%
of our outstanding ordinary shares and one director for so long
as KKR and its affiliates continue to own, directly or
indirectly, at least 5% of our outstanding ordinary shares;
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|
|
|
three designees of Silver Lake, for so long as Silver Lake and
its affiliates either continue to own, directly or indirectly,
at least 24% of our outstanding ordinary shares or have not
transferred any shares to an unaffiliated third-party, provided
that Silver Lake has the right to designate two directors for so
long as Silver Lake and its affiliates continue to own, directly
or indirectly, at least 15% of our outstanding ordinary shares
and one director for so long as Silver Lake and its affiliates
continue to own, directly or indirectly, at least 5% of our
outstanding ordinary shares;
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|
one designee of Seletar Investments Pte Ltd, or Seletar, an
affiliate of Temasek Capital (Private) Limited, so long as it
either continues to own, directly or indirectly, 2.5% of our
outstanding shares and has not sold any of its shares, or
continues to own, directly or indirectly, 5% of our outstanding
shares;
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|
our Chief Executive Officer; and
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|
three other directors mutually agreeable to KKR and Silver Lake,
to which we refer collectively in this prospectus as the
Sponsors.
|
The number of other directors mutually agreeable to the Sponsors
may be increased from time to time with the Sponsors prior
approval, however, the Sponsors may revoke such approval at any
time and immediately remove the excess director from the board
of directors. Currently, as agreed by KKR and Silver Lake, our
board of directors consists of nine members, with KKR and Silver
Lake each having two designees on our board of directors.
Each of KKR, Silver Lake and Seletar has the right to remove and
replace its director-designees at any time and for any reason
and to fill any vacancies otherwise resulting in such director
positions. If the number of directors that an Equity Investor is
entitled to designate is reduced, any vacant seats on our board
of directors will be filled by the board of directors acting in
accordance with its nomination and governance procedures.
Each of KKR and Silver Lake has the right to designate one
member to each committee of the board of directors, so long as
such Sponsor has the right to designate one or more director
nominees to the board of directors and subject to compliance
with applicable federal securities laws and the requirements of
the U.S. exchange on which our ordinary shares are traded.
11
The rights with respect to board composition described here will
terminate upon a change in control transaction, as defined in
the Shareholder Agreement.
Sponsor Approval. The Shareholder Agreement
provides that the following actions by us or any of our
subsidiaries require approval of the Sponsors for so long as the
Sponsors own 50% or more of our outstanding ordinary shares:
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|
|
changing the size or composition of our board of directors;
|
|
|
|
entering into a change of control transaction;
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|
|
acquiring or disposing of assets or entering into joint ventures
with a value in excess of $300 million;
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|
incurring indebtedness in excess of $300 million;
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filing for voluntary liquidation, dissolution, receivership,
bankruptcy or similar insolvency proceeding;
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entering into certain transactions with the Sponsors or any of
their affiliates;
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making material changes in the nature of our business or our
subsidiaries business; and
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amending, waiving or otherwise modifying certain shareholder
agreements.
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The Sponsors previously consented to the boards
appointment of Mr. James Diller, Ms. Justine Lien and
Mr. Donald Macleod to the board of directors.
Co-Investor Protections. The Shareholder
Agreement provides that, other than actions specifically set
forth therein, we will not take any action in respect of any
class of our shares that has a materially disproportionate
effect on specified Equity Investors other than the Sponsors, or
the Co-Investors, as compared to the Sponsors, in their capacity
as shareholders of such class of shares, without first obtaining
the prior written consent of the Co-Investors holding a majority
of such class of shares then held by the Co-Investors.
Transfer Restrictions. Prior to August 6,
2011 (two years after our IPO), neither KKR nor Silver Lake may
transfer its shares without the approval of the other Sponsor,
subject to certain permitted transfers. No Co-Investor may
transfer its shares without the approval of the Sponsors, except
(i) to permitted transferees, (ii) in a transfer in
connection with a sale pursuant to the Registration Rights
Agreement described under Registration Rights
Agreement, or (iii) if either Sponsor has reduced the
number of shares it holds relative to the number of shares
initially held by it, each Co-Investor may sell up to the number
of shares as would cause such Co-Investor to reduce the number
of shares it holds in the same proportion as that of such
Sponsor. These transfer restrictions will terminate upon a
change of control transaction unless terminated earlier by the
Sponsors.
Tag Along Right. Prior to making any transfer
of shares (other than certain customary permitted transfers,
transfers in connection with sales pursuant to the Registration
Rights Agreement, transfers pursuant to Rule 144 and
certain distributions and charitable contributions), any
prospective selling Sponsor must provide written notice to each
Co-Investor setting forth the terms of such proposed transfer.
Each Co-Investor may elect to sell up to its pro rata portion of
the shares (based upon the ownership of such shares by the
transferring Sponsor and all persons entitled to participate in
such transfer) to be sold in such transfer. This tag along right
will terminate upon a change of control transaction unless
terminated earlier by the Sponsors.
Drag Along Right. If the Sponsors approve a
change of control transaction, each Co-Investor will be required
to vote in favor of and not oppose such transaction and, if
structured as a sale of shares, sell its shares to a prospective
buyer on the same terms that are applicable to the Sponsors.
This drag along right will terminate upon a change of control
transaction unless terminated earlier by the Sponsors.
Information Rights. We have agreed to provide
to the Equity Investors, so long as the applicable Equity
Investor owns at least 2.5% of our outstanding ordinary shares,
monthly financial information. We have agreed to provide to each
shareholder party to the Shareholder Agreement the necessary
information for the preparation of such shareholders
income tax returns. So long as the applicable Equity Investor
owns at least 5% of our outstanding ordinary shares, we have
granted such Equity Investor rights to inspect our facilities,
records, files and other information, and to meet with our
management and outside accountants. Each shareholder party to
the Shareholder
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Agreement agrees to keep confidential the confidential
information obtained from us. The information rights will expire
upon a change in control transaction.
Termination. The Shareholder Agreement may be
amended or terminated, and the provisions thereof waived, by an
agreement in writing signed by us and the Equity Investors
holding not less than 70% of our outstanding ordinary shares
held by all Equity Investors. If any amendment would adversely
affect the rights of a particular Equity Investor or adversely
impose additional material obligations on a particular Equity
Investor, then the consent of such particular Equity Investor is
required for the amendment.
Registration
Rights Agreement
We are party to a registration rights agreement, or Registration
Rights Agreement, which provides the Sponsors the right to
demand that we file a registration statement and the Sponsors
and the Co-Investors the right to request that their shares be
covered by a registration statement that we are otherwise
filing, subject to certain limitations. Prior to August 6,
2011 (two years after our IPO), upon the request of both
Sponsors, we may be required to initiate an unlimited number of
registrations under the Securities Act of 1933, as amended, or
the Securities Act, in order to register the resale of their
ordinary shares with an anticipated aggregate offering price of
at least $50 million in the case of a long-form
registration and $20 million in the case of a
short-form registration. After August 6, 2011
(two years after our IPO), each Sponsor may require us to
initiate three long-form registrations, provided
that each has an aggregate offering price of at least
$50 million, and an unlimited number of short-form
registrations, provided that each has an aggregate
offering price of at least $20 million, under the
Securities Act in order to register the resale of their ordinary
shares. The minimum offering amounts may be reduced with the
approval of the Sponsors. In the event that we propose to
register any of our securities under the Securities Act, either
for our own account or for the account of other securityholders,
the Sponsors and Co-Investors are entitled to notice of such
registration and are entitled to certain piggyback
registration rights allowing them to include their ordinary
shares in such registration, subject to certain marketing and
other limitations. We may, in certain circumstances, defer such
registrations. In addition, in an underwritten offering the
managing underwriter, if any, has the right, subject to
specified conditions, to limit the number of registrable
securities such holders may include. Any such limitations on the
number of registrable securities that may be included by such
holders must be on a pro rata basis. The Registration Rights
Agreement also contains customary cross-indemnification
provisions.
Participants in our Amended and Restated Equity Incentive Plan
for Executive Employees of Avago Technologies Limited and
Subsidiaries, or the Executive Plan, are party to a Management
Shareholders Agreement that provides them piggyback
registration rights alongside with the Sponsors and
Co-Investors. For more information, see
Management Shareholders Agreement.
Management
Shareholders Agreement
Each participant in the Executive Plan, including each executive
officer, was required to enter into a Management Shareholders
Agreement with the Company and its controlling shareholder, Bali
Investments S.àr.l, or Bali, in connection with the
executives purchase of shares pursuant to the Executive
Plan. In addition, in connection with our IPO, any person
holding options granted under our Amended and Restated Equity
Incentive Plan for Senior Management Employees of Avago
Technologies Limited and Subsidiaries, or the Senior Management
Plan, to acquire 40,000 or more ordinary shares of the Company
also entered into a Management Shareholders Agreement at the
time of the IPO. Each Management Shareholders Agreement provides
the company with certain rights that effectively restrict the
transfer of the Companys ordinary shares until a change of
control transaction or five years from the date of purchase, or
in the case of options, the date of grant. The restrictive
rights provided to Bali pursuant to each Management Shareholder
Agreement include a bring along right whereby Bali can require
participants to sell shares along with Bali. In addition, each
executive holds a tag-along right whereby each executive may
require Bali to allow the executive to sell along with Bali in
certain sales, and piggyback registration rights
allowing the executive to sell along with Bali in a public
offering.
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Limitations
of Liability and Indemnification Matters
Our articles of association provide that, subject to the
provisions of the Singapore Companies Act, every director,
managing director, secretary or other officer of our company or
our subsidiaries and affiliates shall be entitled to be
indemnified by our company against all costs, charges, losses,
expenses and liabilities incurred by him or her in the execution
and discharge of his or her duties or in relation thereto and in
particular and without prejudice to the generality of the
foregoing, no director, managing director, secretary or other
officer of our company or our subsidiaries and affiliates shall
be liable for the acts, receipts, neglects or defaults of any
other director or officer or for joining in any receipt or other
act for conformity or for any loss or expense happening to our
company through the insufficiency or deficiency of title to any
property acquired by order of the directors for or on behalf of
our company or for the insufficiency or deficiency of any
security in or upon which any of the moneys of our company shall
be invested or for any loss or damage arising from the
bankruptcy, insolvency or tortious act of any person with whom
any moneys, securities or effects shall be deposited or left or
for any other loss, damage or misfortune whatever which shall
happen in the execution of the duties of his or her office or in
relation thereto unless the same happen through his or her own
negligence, default, breach of duty or breach of trust.
The limitation of liability and indemnification provisions in
our articles of association may discourage shareholders from
bringing a lawsuit against directors for breach of their
fiduciary duties. They may also reduce the likelihood of
derivative litigation against directors and officers, even
though an action, if successful, might benefit us and our
shareholders. A shareholders investment may be harmed to
the extent we pay the costs of settlement and damage awards
against directors and officers pursuant to these indemnification
provisions. Insofar as indemnification for liabilities arising
under the Securities Act may be permitted to our directors,
officers and controlling persons pursuant to the foregoing
provisions, or otherwise, we have been advised that, in the
opinion of the SEC, such indemnification is against public
policy as expressed in the Securities Act, and is, therefore,
unenforceable.
The
Nasdaq Global Select Market Listing
Our ordinary shares are listed on Nasdaq under the symbol
AVGO.
Transfer
Agent
The transfer agent and registrar for our ordinary shares is
Computershare Trust Company, N.A.
COMPARISON
OF SHAREHOLDER RIGHTS
We are incorporated under the laws of Singapore. The following
discussion summarizes material differences between the rights of
holders of our ordinary shares and the rights of holders of the
common stock of a typical corporation incorporated under the
laws of the state of Delaware which result from differences in
governing documents and the laws of Singapore and Delaware.
This discussion does not purport to be a complete or
comprehensive statement of the rights of holders of our ordinary
shares under applicable law in Singapore and our articles of
association or the rights of holders of the common stock of a
typical corporation under applicable Delaware law and a typical
certificate of incorporation and bylaws.
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The Singapore Companies Act contains the default articles that
apply to a Singapore-incorporated company to the extent they are
not excluded or modified by a companys articles of
association. They provide examples of the common provisions
adopted by companies in their articles of association. However,
as is the usual practice for companies incorporated in
Singapore, we have specifically excluded the application of
these provisions in our articles of association, which we refer
to below as our articles.
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Delaware
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Singapore Avago Technologies Limited
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Board of Directors
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A typical certificate of incorporation and bylaws would provide
that the number of directors on the board of directors will be
fixed from time to time by a vote of the majority of the
authorized directors. Under Delaware law, a board of directors
can be divided into classes and cumulative voting in the
election of directors is only permitted if expressly authorized
in a corporations certificate of incorporation.
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The memorandum and articles of association of companies will
typically state the minimum and maximum number of directors as
well as provide that the number of directors may be increased or
reduced by shareholders via ordinary resolution passed at a
general meeting, provided that the number of directors following
such increase or reduction is within the maximum and minimum
number of directors provided in our articles and the Singapore
Companies Act, respectively. Our articles provide that the
maximum number of directors will be 13.
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Limitation on Personal Liability of Directors
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A typical certificate of incorporation provides for the
elimination of personal monetary liability of directors for
breach of fiduciary duties as directors to the fullest extent
permissible under the laws of Delaware, except for
liability(i) for any breach of a directors loyalty to
the corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under
Section 174 of the Delaware General Corporation Law
(relating to the liability of directors for unlawful payment of
a dividend or an unlawful stock purchase or redemption) or
(iv) for any transaction from which the director derived an
improper personal benefit. A typical certificate of
incorporation would also provide that if the Delaware General
Corporation Law is amended so as to allow further elimination
of, or limitations on, director liability, then the liability of
directors will be eliminated or limited to the fullest extent
permitted by the Delaware General Corporation Law as so amended.
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Pursuant to the Singapore Companies Act, any provision (whether in the articles of association, contract or otherwise) exempting or indemnifying a director against any liability for negligence, default, breach of duty or breach of trust will be void. Nevertheless, a director can be released by the shareholders of a company for breaches of duty to a company except in the case of fraud, illegality, insolvency and oppression or disregard of minority interests.
Our articles provide that subject to the provisions of the Singapore Companies Act, every director, managing director, secretary and other officer of the Company and its subsidiaries and affiliates, will be indemnified against any liability incurred by such person in defending any proceedings, whether civil or criminal, which relate to anything done or omitted or alleged to be done or omitted by such person as an officer or employee of the company and in which judgment is given in their favor or in which such person is acquitted or in connection with any application under the Singapore Companies Act or any other Singapore statute in which relief is granted to such person by the court unless the same should happen through their own negligence, default, breach of duty or breach of trust.
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Delaware
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Singapore Avago Technologies Limited
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Interested Shareholders
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Section 203 of the Delaware General Corporation Law generally prohibits a Delaware corporation from engaging in specified corporate transactions (such as mergers, stock and asset sales, and loans) with an interested stockholder for three years following the time that the stockholder becomes an interested stockholder. Subject to specified exceptions, an interested stockholder is a person or group that owns 15% or more of the corporations outstanding voting stock (including any rights to acquire stock pursuant to an option, warrant, agreement, arrangement or understanding, or upon the exercise of conversion or exchange rights, and stock with respect to which the person has voting rights only), or is an affiliate or associate of the corporation and was the owner of 15% or more of the voting stock at any time within the previous three years.
A Delaware corporation may elect to opt out of, and not be governed by, Section 203 through a provision in either its original certificate of incorporation, or an amendment to its original certificate or bylaws that was approved by majority stockholder vote. With a limited exception, this amendment would not become effective until 12 months following its adoption.
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There are no comparable provisions in Singapore with respect to
public companies which are not listed on the Singapore Exchange
Securities Trading Limited.
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Removal of Directors
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A typical certificate of incorporation and bylaws provide that,
subject to the rights of holders of any preferred stock,
directors may be removed at any time by the affirmative vote of
the holders of at least a majority, or in some instances a
supermajority, of the voting power of all of the then
outstanding shares entitled to vote generally in the election of
directors, voting together as a single class. A certificate of
incorporation could also provide that such a right is only
exercisable when a director is being removed for cause (removal
of a director only for cause is the default rule in the case of
a classified board).
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According to the Singapore Companies Act, directors of a public
company may be removed before expiration of their term of office
with or without cause by ordinary resolution (i.e., a resolution
which is passed by a simple majority of those shareholders
present and voting in person or by proxy). Notice of the
intention to move such a resolution has to be given to the
company not less than 28 days before the meeting at which
it is moved. The company shall then give notice of such
resolution to its shareholders not less than 14 days before
the meeting. Where any director removed in this manner was
appointed to represent the interests of any particular class of
shareholders or debenture holders, the resolution to remove such
director will not take effect until such directors
successor has been appointed.
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Delaware
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Singapore Avago Technologies Limited
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Filling Vacancies on the Board of Directors
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A typical certificate of incorporation and bylaws provide that,
subject to the rights of the holders of any preferred stock, any
vacancy, whether arising through death, resignation, retirement,
disqualification, removal, an increase in the number of
directors or any other reason, may be filled by a majority vote
of the remaining directors, even if such directors remaining in
office constitute less than a quorum, or by the sole remaining
director. Any newly elected director usually holds office for
the remainder of the full term expiring at the annual meeting of
stockholders at which the term of the class of directors to
which the newly elected director has been elected expires.
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The articles of a Singapore company typically provide that the
directors have the power to appoint any person to be a director,
either to fill a vacancy or as an addition to the existing
directors, but so that the total number of directors will not at
any time exceed the maximum number fixed in the articles. Any
newly elected director shall hold office until the next
following annual general meeting, where such director will then
be eligible for re-election. Our articles provide that the
directors may appoint any person to be a director as an
additional director or to fill a vacancy provided that any
person so appointed will only hold office until the next annual
general meeting, and will then be eligible for re-election.
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Amendment of Governing Documents
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Amendment of Certification of Incorporation and Bylaws
Under the Delaware General Corporation Law, amendments to a corporations certificate of incorporation require the approval of stockholders holding a majority of the outstanding shares entitled to vote on the amendment.
If a class vote on the amendment is required by the Delaware General Corporation Law, a majority of the outstanding stock of the class is required, unless a greater proportion is specified in the certificate of incorporation or by other provisions of the Delaware General Corporation Law. Under the Delaware General Corporation Law, the board of directors may amend bylaws if so authorized in the certificate of incorporation. The stockholders of a Delaware corporation also have the power to amend bylaws.
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Alteration to memorandum and articles of association
Our memorandum and articles may be altered by special resolution (i.e., a resolution passed by at least a three-fourths majority of the shares entitled to vote, present in person or by proxy at a meeting for which not less than 21 days written notice is given). The board of directors has no right to amend the memorandum or articles.
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Meetings of Shareholders
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Annual and Special Meetings
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Annual General Meetings
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Typical bylaws provide that annual meetings of stockholders are
to be held on a date and at a time fixed by the board of
directors. Under the Delaware General Corporation Law, a special
meeting of stockholders may be called by the board of directors
or by any other person authorized to do so in the certificate of
incorporation or the bylaws.
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All companies are required to hold an annual general meeting
once every calendar year. The first annual general meeting must
be held within 18 months of the companys
incorporation and subsequently, not more than 15 months may
elapse between annual general meetings.
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Extraordinary General Meetings
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Any general meeting other than the annual general meeting is
called an extraordinary general meeting. Two or more
shareholders holding not less than 10% of the total number of
issued shares (excluding treasury shares) may call an
extraordinary general meeting. In addition, the articles usually
also provide that general meetings may be convened in accordance
with the Singapore Companies Act by the directors.
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Delaware
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Singapore Avago Technologies Limited
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Notwithstanding anything in the articles, the directors are
required to convene a general meeting if required to do so by
requisition (i.e., written notice to directors requiring that a
meeting be called) by shareholder(s) holding not less than 10%
of the paid-up capital of the company carrying voting rights.
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Our articles provide that the directors may, whenever they
think fit, convene an extraordinary general meeting.
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Quorum Requirements
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Quorum Requirements
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Under the Delaware General Corporation Law, a corporations
certificate of incorporation or bylaws can specify the number of
shares which constitute the quorum required to conduct business
at a meeting, provided that in no event shall a quorum consist
of less than one-third of the shares entitled to vote at a
meeting.
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Our articles provide that shareholders entitled to vote holding
a majority of the number of our issued and paid-up shares,
present in person or by proxy at a meeting, shall be a quorum.
In the event a quorum is not present, the meeting may be
adjourned for one week. When reconvened, the quorum for the
meeting will be shareholders entitled to vote holding between
them a majority of the number of our issued and paid-up shares,
present in person or by proxy at such meeting.
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Indemnification of Officers, Directors and Employees
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Under the Delaware General Corporation Law, subject to specified
limitations in the case of derivative suits brought by a
corporations stockholders in its name, a corporation may
indemnify any person who is made a party to any third-party
action, suit or proceeding on account of being a director,
officer, employee or agent of the corporation (or was serving at
the request of the corporation in such capacity for another
corporation, partnership, joint venture, trust or other
enterprise) against expenses, including attorneys fees,
judgments, fines and amounts paid in settlement actually and
reasonably incurred by him or her in connection with the action,
suit or proceeding through, among other things, a majority vote
of a quorum consisting of directors who were not parties to the
suit or proceeding, if the person:
acted in good faith and in a manner he
or she reasonably believed to be in or not opposed to the best
interests of the corporation or, in some circumstances, at least
not opposed to its best interests; and
in a criminal proceeding, had no
reasonable cause to believe his or her conduct was unlawful.
Delaware corporate law permits indemnification by a corporation
under similar circumstances for expenses (including
attorneys fees) actually and reasonably incurred by such
persons in connection with the defense or settlement of a
derivative action or suit, except that no indemnification may be
made in respect of any claim, issue or matter as to which the
person is adjudged to be liable to the corporation unless the
Delaware Court of Chancery or the court in which the action or
suit was brought determines upon
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The Singapore Companies Act specifically provides that a company
is allowed to:
purchase and maintain for any officer
insurance against any liability which by law would otherwise
attach to such officer in respect of any negligence, default,
breach of duty or breach of trust of which such officer may be
guilty in relation to the company; or
indemnify such officer or auditor
against any liability incurred by such officer or auditor in
defending any proceedings (whether civil or criminal) in which
judgment is given in such officers favor or in which such
officer is acquitted; or
indemnify such officer or auditor
against any liability incurred by such officer or auditor in
connection with any application under specified portions of the
Singapore Companies Act in which relief is granted to such
officer or auditor by a court.
In
cases where a director is sued by the company, the Singapore
Companies Act gives the court the power to relieve directors
either wholly or partially from the consequences of their
negligence, default, breach of duty or breach of trust. However,
Singapore case law has indicated that such relief will not be
granted to a director who has benefited as a result of his or
her breach of trust. In order for relief to be obtained, it must
be shown that (i) the director acted reasonably and honestly;
and (ii) it is fair, having regard to all the circumstances of
the case including those connected with such directors
appointment, to excuse the director.
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Our
articles provide that subject to the provisions of the Singapore
Companies Act, every director, managing director, secretary and
other officer for the time being
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Delaware
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Singapore Avago Technologies Limited
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application that the person is fairly and reasonably entitled
to indemnity for the expenses which the court deems to be
proper.
To the extent a director, officer, employee or agent is
successful in the defense of such an action, suit or proceeding,
the corporation is required by Delaware corporate law to
indemnify such person for reasonable expenses incurred thereby.
Expenses (including attorneys fees) incurred by such
persons in defending any action, suit or proceeding may be paid
in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of
that person to repay the amount if it is ultimately determined
that person is not entitled to be so indemnified.
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of our company and our subsidiaries and affiliates, will be
indemnified by the company against any liability incurred by
such person in defending any proceedings, whether civil or
criminal, which relates to anything done or omitted or alleged
to be done or omitted by such person as an officer or employee
of the company and in which judgment is given in their favor or
in which such person is acquitted or in connection with any
application under the Singapore Companies Act or any other
Singapore statute in which relief is granted to such person by
the court unless the same shall happen through their own
negligence, default, breach of duty or breach of trust.
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Shareholder Approval of Business Combinations
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Generally, under the Delaware General Corporation Law,
completion of a merger, consolidation, or the sale, lease or
exchange of substantially all of a corporations assets or
dissolution requires approval by the board of directors and by a
majority (unless the certificate of incorporation requires a
higher percentage) of outstanding stock of the corporation
entitled to vote.
The
Delaware General Corporation Law also requires a special vote of
stockholders in connection with a business combination with an
interested stockholder as defined in
section 203 of the Delaware General Corporation Law. See
Interested Shareholders above.
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The Singapore Companies Act mandates that specified corporate
actions require approval by the shareholders in a general
meeting, notably:
notwithstanding anything in the
companys memorandum or articles, directors are not
permitted to carry into effect any proposals for disposing of
the whole or substantially the whole of the companys
undertaking or property unless those proposals have been
approved by shareholders in a general meeting;
subject to the memorandum of each
amalgamating company, an amalgamation proposal must be approved
by the shareholders of each amalgamating company via special
resolution at a general meeting; and
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notwithstanding anything in the
companys memorandum or articles, the directors may not,
without the prior approval of shareholders, issue shares,
including shares being issued in connection with corporate
actions.
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Shareholder Action Without A Meeting
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Under the Delaware General Corporation Law, unless otherwise
provided in a corporations certificate of incorporation,
any action that may be taken at a meeting of stockholders may be
taken without a meeting, without prior notice and without a vote
if the holders of outstanding stock, having not less than the
minimum number of votes that would be necessary to authorize
such action, consent in writing. It is not uncommon for a
corporations certificate of incorporation to prohibit such
action.
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There are no equivalent provisions in respect of public
companies which are not listed in Singapore.
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Delaware
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Singapore Avago Technologies Limited
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Shareholder Suits
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Under the Delaware General Corporation Law, a stockholder may
bring a derivative action on behalf of the corporation to
enforce the rights of the corporation. An individual also may
commence a class action suit on behalf of himself or herself and
other similarly situated stockholders where the requirements for
maintaining a class action under the Delaware General
Corporation Law have been met. A person may institute and
maintain such a suit only if such person was a stockholder at
the time of the transaction which is the subject of the suit or
his or her shares thereafter devolved upon him or her by
operation of law. Additionally, under Delaware case law, the
plaintiff generally must be a stockholder not only at the time
of the transaction which is the subject of the suit, but also
through the duration of the derivative suit. The Delaware
General Corporation Law also requires that the derivative
plaintiff make a demand on the directors of the corporation to
assert the corporate claim before the suit may be prosecuted by
the derivative plaintiff, unless such demand would be futile.
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Derivative actions
The Singapore Companies Act has a provision, which is limited in its scope to companies that are not listed on the securities exchange in Singapore, which provides a mechanism enabling shareholders to apply to the court for leave to bring a derivative action on behalf of the company.
Applications are generally made by shareholders of the company or individual directors, but courts are given the discretion to allow such persons as they deem proper to apply (e.g., beneficial owner of shares).
It should be noted that this provision of the Singapore Companies Act is primarily used by minority shareholders to bring an action in the name and on behalf of the company or intervene in an action to which the company is a party for the purpose of prosecuting, defending or discontinuing the action on behalf of the company.
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Class actions
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The concept of class action suits, which allows individual
shareholders to bring an action seeking to represent the class
or classes of shareholders, does not exist in Singapore.
However, it is possible as a matter of procedure for a number of
shareholders to lead an action and establish liability on behalf
of themselves and other shareholders who join in or who are made
parties to the action. These shareholders are commonly known as
lead plaintiffs. Further, there are circumstances
under the provisions of certain Singapore statutes where
shareholders may file and prove their claims for compensation in
the event that the company has been convicted of a criminal
offense or has a court order for the payment of a civil penalty
made against it.
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Distributions and Dividends; Repurchases and Redemptions
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The Delaware General Corporation Law permits a corporation to
declare and pay dividends out of statutory surplus or, if there
is no surplus, out of net profits for the fiscal year in which
the dividend is declared and/or for the preceding fiscal year as
long as the amount of capital of the corporation following the
declaration and payment of the dividend is not less than the
aggregate amount of the capital represented by the issued and
outstanding stock of all classes having a preference upon the
distribution of assets.
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The Singapore Companies Act provides that no dividends can be paid to shareholders except out of profits.
The Singapore Companies Act does not provide a definition on when profits are deemed to be available for the purpose of paying dividends and this is accordingly governed by case law.
Our articles provide that no dividend can be paid otherwise than out of profits.
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Delaware
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Singapore Avago Technologies Limited
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Under the Delaware General Corporation Law, any corporation may
purchase or redeem its own shares, except that generally it may
not purchase or redeem these shares if the capital of the
corporation is impaired at the time or would become impaired as
a result of the redemption. A corporation may, however, purchase
or redeem out of capital shares that are entitled upon any
distribution of its assets to a preference over another class or
series of its shares if the shares are to be retired and the
capital reduced.
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Acquisition of a companys own shares
The Singapore Companies Act generally prohibits a company from acquiring its own shares subject to certain exceptions. Any contract or transaction by which a company acquires or transfers its own shares is void. However, provided that it is expressly permitted to do so by its articles and subject to the special conditions of each permitted acquisition contained in the Singapore Companies Act, a company may:
redeem redeemable preference shares (the redemption of these shares will not reduce the capital of the company). Preference shares may be redeemed out of capital if all the directors make a solvency statement in relation to such redemption in accordance with the Singapore Companies Act;
whether listed on a securities exchange or not, make an off-market purchase of its own shares in accordance with an equal access scheme authorized in advance at a general meeting;
if it is not listed on a securities exchange, make a selective off-market purchase of its own shares in accordance with an agreement authorized in advance at a general meeting by a special resolution where persons whose shares are to be acquired and their associated persons have abstained from voting; and
whether listed on a securities exchange or not, make an acquisition of its own shares under a contingent purchase contract which has been authorized in advance at a general meeting by a special resolution.
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A company may also purchase its own shares by an order of a
Singapore court.
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The total number of ordinary shares that may be acquired by a
company in a relevant period may not exceed 10% of the total
number of ordinary shares in that class as of the date of the
last annual general meeting of the company or as of the date of
the resolution to acquire the shares, whichever is higher.
Where, however, a company has reduced its share capital by a
special resolution or a Singapore court made an order to such
effect, the total number of ordinary shares in any class shall
be taken to be the total number of ordinary shares in that class
as altered by the special resolution or the order of the court.
Payment must be made out of the companys distributable
profits or capital, provided that the company is solvent.
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Delaware
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Singapore Avago Technologies Limited
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Financial assistance for the acquisition of shares
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A company may not give financial assistance to any person whether directly or indirectly for the purpose of:
the acquisition or proposed acquisition of shares in the company or units of such shares; or
the acquisition or proposed acquisition of shares in its holding company or units of such shares.
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Financial assistance may take the form of a loan, the giving of
a guarantee, the provision of security, the release of an
obligation, the release of a debt or otherwise.
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However, it should be noted that a company may provide financial
assistance for the acquisition of its shares or shares in its
holding company if it complies with the requirements (including
approval by special resolution) set out in the Singapore
Companies Act. Our articles provide that subject to the
provisions of the Singapore Companies Act, we may purchase or
otherwise acquire our own shares upon such terms and subject to
such conditions as we may deem fit. These shares may be held as
treasury shares or cancelled as provided in the Singapore
Companies Act or dealt with in such manner as may be permitted
under the Singapore Companies Act. On cancellation of the
shares, the rights and privileges attached to those shares will
expire.
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Transactions with Officers or Directors
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Under the Delaware General Corporation Law, some contracts or
transactions in which one or more of a corporations
directors has an interest are not void or voidable because of
such interest provided that some conditions, such as obtaining
the required approval and fulfilling the requirements of good
faith and full disclosure, are met. Under the Delaware General
Corporation Law, either (a) the stockholders or the board
of directors must approve in good faith any such contract or
transaction after full disclosure of the material facts or
(b) the contract or transaction must have been
fair as to the corporation at the time it was
approved. If board approval is sought, the contract or
transaction must be approved in good faith by a majority of
disinterested directors after full disclosure of material facts,
even though less than a majority of a quorum.
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Under the Singapore Companies Act, directors are not prohibited from dealing with the company, but where they have an interest in a transaction with the company, that interest must be disclosed to the board of directors. In particular, every director who is in any way, whether directly or indirectly, interested in a transaction or proposed transaction with the company must, as soon practicable after the relevant facts have come to such directors knowledge, declare the nature of such directors interest at a board of directors meeting.
In addition, a director who holds any office or possesses any property which directly or indirectly might create interests in conflict with such directors duties as director is required to declare the fact and the nature, character and extent of the conflict at a meeting of directors.
The Singapore Companies Act extends the scope of this statutory duty of a director to disclose any interests by pronouncing that an interest of a member of a directors family (including spouse, son, adopted son, step-son, daughter, adopted daughter and step-daughter) will be treated as an interest of the director.
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Delaware
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Singapore Avago Technologies Limited
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There is however no requirement for disclosure where the
interest of the director consists only of being a member or
creditor of a corporation which is interested in the proposed
transaction with the company if the interest may properly be
regarded as immaterial. Where the proposed transaction relates
to any loan to the company, no disclosure need be made where the
director has only guaranteed the repayment of such loan, unless
the articles of association provide otherwise.
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Further, where the proposed transaction is to be made with or
for the benefit of a related corporation (i.e. the holding
company, subsidiary or subsidiary of a common holding company)
no disclosure need be made of the fact that the director is also
a director of that corporation, unless the articles of
association provide otherwise.
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Subject to specified exceptions, the Singapore Companies Act
prohibits a company from making a loan to its directors or to
directors of a related corporation, or giving a guarantee or
security in connection with such a loan.
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Companies are also prohibited from making loans to its
directors spouse or children (whether adopted or naturally
or step-children), or giving a guarantee or security in
connection with such a loan.
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Dissenters Rights
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Under the Delaware General Corporation Law, a stockholder of a
corporation participating in some types of major corporate
transactions may, under varying circumstances, be entitled to
appraisal rights pursuant to which the stockholder may receive
cash in the amount of the fair market value of his or her shares
in lieu of the consideration he or she would otherwise receive
in the transaction.
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There are no equivalent provisions in Singapore under the
Singapore Companies Act.
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Cumulative Voting
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Under the Delaware General Corporation Law, a corporation may
adopt in its bylaws that its directors shall be elected by
cumulative voting. When directors are elected by cumulative
voting, a stockholder has the number of votes equal to the
number of shares held by such stockholder times the number of
directors nominated for election. The stockholder may cast all
of such votes for one director or among the directors in any
proportion.
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There is no equivalent provision in respect of companies
incorporated in Singapore.
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Delaware
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Singapore Avago Technologies Limited
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Anti-Takeover Measures
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Under the Delaware General Corporation Law, the certificate of incorporation of a corporation may give the board the right to issue new classes of preferred stock with voting, conversion, dividend distribution, and other rights to be determined by the board at the time of issuance, which could prevent a takeover attempt and thereby preclude shareholders from realizing a potential premium over the market value of their shares.
In addition, Delaware law does not prohibit a corporation from adopting a stockholder rights plan, or poison pill, which could prevent a takeover attempt and also preclude shareholders from realizing a potential premium over the market value of their shares.
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The articles of a Singapore company typically provide that the company may allot and issue new shares of a different class with preferential, deferred, qualified or other special rights as its board of directors may determine with the prior approval of the companys shareholders in a general meeting. Our articles provide that our shareholders may grant to our board the general authority to issue such preference shares until the next general meeting. See Description of Share Capital Preference Shares elsewhere in this prospectus.
Singapore law does not generally prohibit a corporation from adopting poison pill arrangements which could prevent a takeover attempt and also preclude shareholders from realizing a potential premium over the market value of their shares.
However, under the Singapore Code on Take-overs and Mergers, if, in the course of an offer, or even before the date of the offer, the board of the offeree company has reason to believe that a bona fide offer is imminent, the board must not, except pursuant to a contract entered into earlier, take any action, without the approval of shareholders at a general meeting, on the affairs of the offeree company that could effectively result in any bona fide offer being frustrated or the shareholders being denied an opportunity to decide on its merits.
See Description of Share Capital Takeovers elsewhere in this prospectus for a description of the Singapore Code on Take-overs and Mergers.
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DESCRIPTION
OF DEBT SECURITIES
The following description, together with the additional
information we include in any applicable prospectus supplement,
summarizes certain general terms and provisions of the debt
securities that we may offer under this prospectus. When we
offer to sell a particular series of debt securities, we will
describe the specific terms of the series in a supplement to
this prospectus. We will also indicate in the supplement whether
the general terms and provisions described in this prospectus
apply to a particular series of debt securities.
We may issue debt securities either separately, or together
with, or upon the conversion or exercise of or in exchange for,
other securities described in this prospectus. Debt securities
may be our senior, senior subordinated or subordinated
obligations and, unless otherwise specified in a supplement to
this prospectus, the debt securities will be our direct,
unsecured obligations and may be issued in one or more series.
The debt securities will be issued under an indenture between us
and Wilmington Trust FSB, as trustee. We have summarized
select portions of the indenture below. The summary is not
complete. The form of the indenture has been filed as an exhibit
to the registration statement and you should read the indenture
for provisions that may be important to you. In the summary
below, we have included references to the section numbers of the
indenture so that you can easily locate these provisions.
Capitalized terms used in the summary and not defined herein
have the meanings specified in the indenture.
As used in this section only, Avago, we,
our or us refer to Avago Technologies
Limited excluding our subsidiaries, unless expressly stated or
the context otherwise requires.
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General
The terms of each series of debt securities will be established
by or pursuant to a resolution of our board of directors and set
forth or determined in the manner provided in a resolution of
our board of directors, in an officers certificate or by a
supplemental indenture. (Section 2.2) The particular terms
of each series of debt securities will be described in a
prospectus supplement relating to such series (including any
pricing supplement or term sheet).
We can issue an unlimited amount of debt securities under the
indenture that may be in one or more series with the same or
various maturities, at par, at a premium, or at a discount. We
will set forth in a prospectus supplement (including any pricing
supplement or term sheet) relating to any series of debt
securities being offered, the aggregate principal amount and the
following terms of the debt securities, if applicable:
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the title and ranking of the debt securities;
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the price or prices (expressed as a percentage of the principal
amount) at which we will sell the debt securities;
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any limit on the aggregate principal amount of the debt
securities;
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the date or dates on which we will pay the principal of and
premium, if any, on the debt securities;
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the rate or rates (which may be fixed or variable) per annum or
the method used to determine the rate or rates (including any
commodity, commodity index, stock exchange index or financial
index) at which the debt securities will bear interest, the date
or dates from which interest will accrue, the date or dates on
which interest will commence and be payable and any regular
record date for the interest payable on any interest payment
date;
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the place or places where principal of, premium, if any, and
interest on the debt securities will be payable;
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the price or prices and the terms and conditions upon which we
may redeem the debt securities;
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any obligation we have to redeem or purchase the debt securities
pursuant to any sinking fund or analogous provisions or at the
option of a holder of debt securities;
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the dates on which and the price or prices at which we will
repurchase debt securities at the option of the holders of debt
securities and other detailed terms and provisions of these
repurchase obligations;
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the denominations in which the debt securities will be issued,
if other than denominations of $1,000 and any integral multiple
thereof;
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whether the debt securities will be issued in the form of
certificated debt securities or global debt securities;
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the portion of principal amount of the debt securities payable
upon declaration of acceleration of the maturity date, if other
than the principal amount;
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the currency of denomination of the debt securities;
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the designation of the currency, currencies or currency units in
which payment of principal of, premium and interest on the debt
securities will be made;
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if payments of principal of, premium or interest on the debt
securities will be made in one or more currencies or currency
units other than that or those in which the debt securities are
denominated, the manner in which the exchange rate with respect
to these payments will be determined;
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the manner in which the amounts of payment of principal of,
premium, if any, or interest on the debt securities will be
determined, if these amounts may be determined by reference to
an index based on a currency or currencies other than that in
which the debt securities are denominated or designated to be
payable or by reference to a commodity, commodity index, stock
exchange index or financial index;
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any provisions relating to any security provided for the debt
securities;
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any addition to, deletion of or change in the Events of Default
described in this prospectus or in the indenture with respect to
the debt securities and any change in the acceleration
provisions described in this prospectus or in the indenture with
respect to the debt securities;
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any addition to, deletion of or change in the covenants
described in this prospectus or in the indenture with respect to
the debt securities;
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any depositaries, interest rate calculation agents, exchange
rate calculation agents or other agents with respect to the debt
securities (Section 2.2); and
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any other terms of the debt securities, which may supplement,
modify or delete any provision of the indenture as it applies to
that series.
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In addition, the indenture does not limit our ability to issue
convertible or subordinated debt securities. Any conversion or
subordination provisions of a particular series of debt
securities will be set forth in the resolution of our board of
directors, the officers certificate or supplemental
indenture related to that series of debt securities, as
applicable, and will be described in the applicable prospectus
supplement. Such terms may include provisions for conversion,
either mandatory, at the option of the holder or at our option,
in which case the number of shares of ordinary shares or other
securities to be received by the holders of debt securities
would be calculated as of a time and in the manner stated in the
prospectus supplement.
We may issue debt securities that provide for an amount less
than their stated principal amount to be due and payable upon
declaration of acceleration of their maturity pursuant to the
terms of the indenture. We will provide you with information on
the federal income tax considerations and other special
considerations applicable to any of these debt securities in the
applicable prospectus supplement.
If we denominate the purchase price of any of the debt
securities in a foreign currency or currencies or a foreign
currency unit or units, or if the principal of and any premium
and interest on any series of debt securities is payable in a
foreign currency or currencies or a foreign currency unit or
units, we will provide you with information on the restrictions,
elections, general tax considerations, specific terms and other
information with respect to that issue of debt securities and
such foreign currency or currencies or foreign currency unit or
units in the applicable prospectus supplement.
Transfer
and Exchange
Each debt security will be represented by either one or more
global securities registered in the name of The Depository
Trust Company, as Depositary, or the Depositary, or a
nominee (we will refer to any debt security represented by a
global debt security as a book-entry debt security),
or a certificate issued in definitive registered form (we will
refer to any debt security represented by a certificated
security as a certificated debt security) as set
forth in the applicable prospectus supplement. Except as set
forth under the heading Global Debt Securities and
Book-Entry System below, book-entry debt securities will
not be issuable in certificated form.
Certificated Debt Securities. You may transfer
or exchange certificated debt securities at any office we
maintain for this purpose in accordance with the terms of the
indenture. No service charge will be made for any transfer or
exchange of certificated debt securities, but we may require
payment of a sum sufficient to cover any tax or other
governmental charge payable in connection with a transfer or
exchange.
You may effect the transfer of certificated debt securities and
the right to receive the principal of, premium and interest on
certificated debt securities only by surrendering the
certificate representing those certificated debt securities and
either reissuance by us or the trustee of the certificate to the
new holder or the issuance by us or the trustee of a new
certificate to the new holder.
Global Debt Securities and Book-Entry
System. Each global debt security representing
book-entry debt securities will be deposited with, or on behalf
of, the Depositary, and registered in the name of the Depositary
or a nominee of the Depositary. Please see Global
Securities.
26
No
Protection In the Event of a Change of Control
Unless we state otherwise in the applicable prospectus
supplement, the debt securities will not contain any provisions
which may afford holders of the debt securities protection in
the event we have a change in control or in the event of a
highly leveraged transaction (whether or not such transaction
results in a change in control) which could adversely affect
holders of debt securities.
Covenants
We will set forth in the applicable prospectus supplement any
restrictive covenants applicable to any issue of debt securities.
Consolidation,
Merger and Sale of Assets
We may not consolidate with or merge with or into, or convey,
transfer or lease all or substantially all of our properties and
assets to, any person (a successor person) unless:
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we are the surviving corporation or the successor person (if
other than Avago) is a corporation organized and validly
existing under the laws of any U.S. domestic jurisdiction
and expressly assumes our obligations on the debt securities and
under the indenture;
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immediately after giving effect to the transaction, no Event of
Default, and no event which, after notice or lapse of time, or
both, would become an Event of Default, shall have occurred and
be continuing under the indenture; and
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certain other conditions are met.
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Notwithstanding the above, any subsidiary of Avago may
consolidate with, merge into or transfer all or part of its
properties to Avago. (Section 5.1)
Events of
Default
Event of Default means with respect to any
series of debt securities, any of the following:
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default in the payment of any interest upon any debt security of
that series when it becomes due and payable, and continuance of
that default for a period of 30 days (unless the entire
amount of the payment is deposited by us with the trustee or
with a paying agent prior to the expiration of the
30-day
period);
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default in the payment of principal of or premium, if any, on
any debt security of that series when due and payable;
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default in the performance or breach of any other covenant or
warranty by us in the indenture (other than a covenant or
warranty that has been included in the indenture solely for the
benefit of a series of debt securities other than that series),
which default continues uncured for a period of 60 days
after we receive written notice from the trustee or we and the
trustee receive written notice from the holders of not less than
25% in principal amount of the outstanding debt securities of
that series as provided in the indenture;
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certain events of bankruptcy, insolvency or reorganization of
Avago; and
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any other Event of Default provided with respect to debt
securities of that series that is described in the applicable
prospectus supplement.
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No Event of Default with respect to a particular series of debt
securities (except as to certain events of bankruptcy,
insolvency or reorganization) necessarily constitutes an Event
of Default with respect to any other series of debt securities.
(Section 6.1) The occurrence of certain Events of Default
or an acceleration under the indenture may constitute an event
of default under certain indebtedness of ours or our
subsidiaries outstanding from time to time.
If an Event of Default with respect to debt securities of any
series at the time outstanding occurs and is continuing, then
the trustee or the holders of not less than 25% in principal
amount of the outstanding debt securities
27
of that series may, by a notice in writing to us (and to the
trustee if given by the holders), declare to be due and payable
immediately the principal of (or, if the debt securities of that
series are discount securities, that portion of the principal
amount as may be specified in the terms of that series) and
accrued and unpaid interest, if any, on all debt securities of
that series. In the case of an Event of Default resulting from
certain events of bankruptcy, insolvency or reorganization, the
principal (or such specified amount) of and accrued and unpaid
interest, if any, on all outstanding debt securities will become
and be immediately due and payable without any declaration or
other act on the part of the trustee or any holder of
outstanding debt securities. At any time after a declaration of
acceleration with respect to debt securities of any series has
been made, but before a judgment or decree for payment of the
money due has been obtained by the trustee, the holders of a
majority in principal amount of the outstanding debt securities
of that series may rescind and annul the acceleration if all
Events of Default, other than the non-payment of accelerated
principal and interest, if any, with respect to debt securities
of that series, have been cured or waived as provided in the
indenture. (Section 6.2) We refer you to the prospectus
supplement relating to any series of debt securities that are
discount securities for the particular provisions relating to
acceleration of a portion of the principal amount of such
discount securities upon the occurrence of an Event of Default.
The indenture provides that the trustee will be under no
obligation to exercise any of its rights or powers under the
indenture unless the trustee receives indemnity satisfactory to
it against any loss, liability or expense. (Section 7.1(e))
Subject to certain rights of the trustee, the holders of a
majority in principal amount of the outstanding debt securities
of any series will have the right to direct the time, method and
place of conducting any proceeding for any remedy available to
the trustee or exercising any trust or power conferred on the
trustee with respect to the debt securities of that series.
(Section 6.12)
No holder of any debt security of any series will have any right
to institute any proceeding, judicial or otherwise, with respect
to the indenture or for the appointment of a receiver or
trustee, or for any remedy under the indenture, unless:
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that holder has previously given to the trustee written notice
of a continuing Event of Default with respect to debt securities
of that series; and
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the holders of not less than 25% in principal amount of the
outstanding debt securities of that series have made written
request, and offered reasonable indemnity or security, to the
trustee to institute the proceeding as trustee, and the trustee
has not received from the holders of not less than a majority in
principal amount of the outstanding debt securities of that
series a direction inconsistent with that request and has failed
to institute the proceeding within 60 days.
(Section 6.7)
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Notwithstanding the foregoing, the holder of any debt security
will have an absolute and unconditional right to receive payment
of the principal of, premium and any interest on that debt
security on or after the due dates expressed in that debt
security and to institute suit for the enforcement of payment.
(Section 6.8)
The indenture requires us, within 120 days after the end of
our fiscal year, to furnish to the trustee a statement as to
compliance with the indenture. (Section 4.3) The indenture
provides that the trustee may withhold notice to the holders of
debt securities of any series of any Default or Event of Default
(except in payment on any debt securities of that series) with
respect to debt securities of that series if it in good faith
determines that withholding notice is in the interest of the
holders of those debt securities. (Section 7.5)
Modification
and Waiver
We may modify and amend the indenture with the consent of the
holders of at least a majority in principal amount of the
outstanding debt securities of each series affected by the
modifications or amendments. We may not make any modification or
amendment without the consent of the holders of each affected
debt security then outstanding if that amendment will:
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reduce the amount of debt securities whose holders must consent
to an amendment, supplement or waiver;
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reduce the rate of or extend the time for payment of interest
(including default interest) on any debt security;
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reduce the principal of or premium on or change the fixed
maturity of any debt security or reduce the amount of, or
postpone the date fixed for, the payment of any sinking fund or
analogous obligation with respect to any series of debt
securities;
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reduce the principal amount of discount securities payable upon
acceleration of maturity;
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waive a default in the payment of the principal of, premium or
interest on any debt security (except a rescission of
acceleration of the debt securities of any series by the holders
of at least a majority in aggregate principal amount of the then
outstanding debt securities of that series and a waiver of the
payment default that resulted from such acceleration);
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make the principal of or premium or interest on any debt
security payable in currency other than that stated in the debt
security;
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make any change to certain provisions of the indenture relating
to, among other things, the right of holders of debt securities
to receive payment of the principal of, premium and interest on
those debt securities and to institute suit for the enforcement
of any such payment and to waivers or amendments; or
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waive a redemption payment with respect to any debt security.
(Section 9.3)
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Except for certain specified provisions, the holders of at least
a majority in principal amount of the outstanding debt
securities of any series may on behalf of the holders of all
debt securities of that series waive our compliance with
provisions of the indenture. (Section 9.2) The holders of a
majority in principal amount of the outstanding debt securities
of any series may on behalf of the holders of all the debt
securities of such series waive any past default under the
indenture with respect to that series and its consequences,
except a default in the payment of the principal of, premium or
any interest on any debt security of that series; provided,
however, that the holders of a majority in principal amount of
the outstanding debt securities of any series may rescind an
acceleration and its consequences, including any related payment
default that resulted from the acceleration. (Section 6.13)
Defeasance
of Debt Securities and Certain Covenants in Certain
Circumstances
Legal Defeasance. The indenture provides that,
unless otherwise provided by the terms of the applicable series
of debt securities, we may be discharged from any and all
obligations in respect of the debt securities of any series
(except for certain obligations to register the transfer or
exchange of debt securities of such series, to replace stolen,
lost or mutilated debt securities of such series, and to
maintain paying agencies and certain provisions relating to the
treatment of funds held by paying agents). We will be so
discharged upon the deposit with the trustee, in trust, of money
and/or
U.S. Government Obligations or, in the case of debt
securities denominated in a single currency other than
U.S. Dollars, Foreign Government Obligations, that, through
the payment of interest and principal in accordance with their
terms, will provide money in an amount sufficient in the opinion
of a nationally recognized firm of independent public
accountants to pay and discharge each installment of principal,
premium and interest on and any mandatory sinking fund payments
in respect of the debt securities of that series on the stated
maturity of those payments in accordance with the terms of the
indenture and those debt securities.
This discharge may occur only if, among other things, we have
delivered to the trustee an opinion of counsel stating that we
have received from, or there has been published by, the United
States Internal Revenue Service a ruling or, since the date of
execution of the indenture, there has been a change in the
applicable United States federal income tax law, in either case
to the effect that, and based thereon such opinion shall confirm
that, the holders of the debt securities of that series will not
recognize income, gain or loss for United States federal income
tax purposes as a result of the deposit, defeasance and
discharge and will be subject to United States federal income
tax on the same amounts and in the same manner and at the same
times as would have been the case if the deposit, defeasance and
discharge had not occurred. (Section 8.3)
Defeasance of Certain Covenants. The indenture
provides that, unless otherwise provided by the terms of the
applicable series of debt securities, upon compliance with
certain conditions:
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we may omit to comply with the covenant described under the
heading Consolidation, Merger and Sale of Assets and
certain other covenants set forth in the indenture, as well as
any additional covenants which may be set forth in the
applicable prospectus supplement; and
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any omission to comply with those covenants will not constitute
a Default or an Event of Default with respect to the debt
securities of that series (covenant defeasance).
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The conditions include:
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depositing with the trustee money
and/or
U.S. Government Obligations or, in the case of debt
securities denominated in a single currency other than
U.S. Dollars, Foreign Government Obligations, that, through
the payment of interest and principal in accordance with their
terms, will provide money in an amount sufficient in the opinion
of a nationally recognized firm of independent public
accountants to pay and discharge each installment of principal
of, premium and interest on and any mandatory sinking fund
payments in respect of the debt securities of that series on the
stated maturity of those payments in accordance with the terms
of the indenture and those debt securities; and
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delivering to the trustee an opinion of counsel to the effect
that the holders of the debt securities of that series will not
recognize income, gain or loss for United States federal income
tax purposes as a result of the deposit and related covenant
defeasance and will be subject to United States federal income
tax on the same amounts and in the same manner and at the same
times as would have been the case if the deposit and related
covenant defeasance had not occurred. (Section 8.4)
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Covenant Defeasance and Events of Default. In
the event we exercise our option to effect covenant defeasance
with respect to any series of debt securities and the debt
securities of that series are declared due and payable because
of the occurrence of any Event of Default, the amount of money
and/or
U.S. Government Obligations or Foreign Government
Obligations on deposit with the trustee will be sufficient to
pay amounts due on the debt securities of that series at the
time of their stated maturity but may not be sufficient to pay
amounts due on the debt securities of that series at the time of
the acceleration resulting from the Event of Default. However,
we shall remain liable for those payments.
Foreign Government Obligations means, with
respect to debt securities of any series that are denominated in
a currency other than U.S. Dollars:
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direct obligations of the government that issued or caused to be
issued such currency for the payment of which obligations its
full faith and credit is pledged which are not callable or
redeemable at the option of the issuer thereof; or
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obligations of a person controlled or supervised by or acting as
an agency or instrumentality of that government the timely
payment of which is unconditionally guaranteed as a full faith
and credit obligation by that government which are not callable
or redeemable at the option of the issuer thereof.
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Governing
Law
The indenture and the debt securities will be governed by, and
construed in accordance with, the internal laws of the State of
New York. (Section 10.10)
DESCRIPTION
OF WARRANTS
The following description, together with the additional
information we include in any applicable prospectus supplement,
summarizes the material terms and provisions of the warrants
that we may offer under this prospectus, which consist of
warrants to purchase ordinary shares
and/or debt
securities in one or more series. Warrants may be offered
independently or together with ordinary shares
and/or debt
securities offered by any prospectus supplement, and may be
attached to or separate from those securities.
While the terms we have summarized below will generally apply to
any future warrants we may offer under this prospectus, we will
describe the particular terms of any warrants that we may offer
in more detail in the applicable prospectus supplement. The
specific terms of any warrants may differ from the description
provided below as a result of negotiations with third parties in
connection with the issuance of those warrants, as well as for
other reasons. Because the terms of any warrants we offer under
a prospectus supplement may differ from the terms we describe
below, you should rely solely on information in the applicable
prospectus supplement if that summary is different from the
summary in this prospectus.
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We will issue the warrants under a warrant agreement, which we
will enter into with a warrant agent to be selected by us. We
use the term warrant agreement to refer to any of
these warrant agreements. We use the term warrant
agent to refer to the warrant agent under any of these
warrant agreements. The warrant agent will act solely as an
agent of ours in connection with the warrants and will not act
as an agent for the holders or beneficial owners of the warrants.
We will incorporate by reference into the registration statement
of which this prospectus is a part the form of warrant
agreement, including a form of warrant certificate, that
describes the terms of the series of warrants we are offering
before the issuance of the related series of warrants. The
following summaries of material provisions of the warrants and
the warrant agreements are subject to, and qualified in their
entirety by reference to, all the provisions of the warrant
agreement applicable to a particular series of warrants. We urge
you to read any applicable prospectus supplement related to the
warrants that we sell under this prospectus, as well as the
complete warrant agreement that contain the terms of the
warrants and defines your rights as a warrant holder.
We will describe in the applicable prospectus supplement the
terms relating to a series of warrants. If warrants for the
purchase of debt securities are offered, the prospectus
supplement will describe the following terms, to the extent
applicable:
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the offering price and the aggregate number of warrants offered;
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the currencies in which the warrants are being offered;
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the designation, aggregate principal amount, currencies,
denominations and terms of the series of debt securities that
can be purchased if a holder exercises a warrant;
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the designation and terms of any series of debt securities with
which the warrants are being offered and the number of warrants
offered with each such debt security;
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the date on and after which the holder of the warrants can
transfer them separately from the related series of debt
securities;
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the terms of any rights to redeem or call the warrants;
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the date on which the right to exercise the warrants begins and
the date on which that right expires;
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federal income tax consequences of holding or exercising the
warrants; and
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any other specific terms, preferences, rights or limitations of,
or restrictions on, the warrants.
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Warrants for the purchase of debt securities will be in
registered form only.
If warrants for the purchase of ordinary shares are offered, the
prospectus supplement will describe the following terms, to the
extent applicable:
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the offering price and the aggregate number of warrants offered;
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the total number of shares that can be purchased if a holder of
the warrants exercises them;
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the date on and after which the holder of the warrants can
transfer them separately from the related ordinary shares;
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the number of ordinary shares that can be purchased if a holder
exercises the warrant and the price at which that ordinary share
may be purchased upon exercise, including, if applicable, any
provisions for changes to or adjustments in the exercise price
and in the securities or other property receivable upon exercise;
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the terms of any rights to redeem or call, or accelerate the
expiration of, the warrants;
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the date on which the right to exercise the warrants begins and
the date on which that right expires;
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federal income tax consequences of holding or exercising the
warrants; and
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any other specific terms, preferences, rights or limitations of,
or restrictions on, the warrants.
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Warrants for the purchase of ordinary shares will be in
registered form only.
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A holder of warrant certificates may exchange them for new
certificates of different denominations, present them for
registration of transfer and exercise them at the corporate
trust office of the warrant agent or any other office indicated
in the applicable prospectus supplement. Until any warrants to
purchase debt securities are exercised, the holder of the
warrants will not have any of the rights of holders of the debt
securities that can be purchased upon exercise, including any
rights to receive payments of principal, premium or interest on
the underlying debt securities or to enforce covenants in the
applicable indenture. Until any warrants to purchase ordinary
shares are exercised, holders of the warrants will not have any
rights of holders of the underlying ordinary shares, including
any rights to receive dividends or to exercise any voting
rights, except to the extent set forth under
Warrant Adjustments below.
Exercise
of Warrants
Each holder of a warrant is entitled to purchase the principal
amount of debt securities or number of ordinary shares, as the
case may be, at the exercise price described in the applicable
prospectus supplement. After the close of business on the day
when the right to exercise terminates (or a later date if we
extend the time for exercise), unexercised warrants will become
void.
A holder of warrants may exercise them by following the general
procedure outlined below:
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delivering to the warrant agent the payment required by the
applicable prospectus supplement to purchase the underlying
security;
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properly completing and signing the reverse side of the warrant
certificate representing the warrants; and
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delivering the warrant certificate representing the warrants to
the warrant agent within five business days of the warrant agent
receiving payment of the exercise price.
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If you comply with the procedures described above, your warrants
will be considered to have been exercised when the warrant agent
receives payment of the exercise price, subject to the transfer
books for the securities issuable upon exercise of the warrant
not being closed on such date. After you have completed those
procedures and subject to the foregoing, we will, as soon as
practicable, issue and deliver to you the debt securities or
ordinary shares that you purchased upon exercise. If you
exercise fewer than all of the warrants represented by a warrant
certificate, a new warrant certificate will be issued to you for
the unexercised amount of warrants. Holders of warrants will be
required to pay any tax or governmental charge that may be
imposed in connection with transferring the underlying
securities in connection with the exercise of the warrants.
Amendments
and Supplements to the Warrant Agreements
We may amend or supplement a warrant agreement without the
consent of the holders of the applicable warrants to cure
ambiguities in the warrant agreement, to cure or correct a
defective provision in the warrant agreement, or to provide for
other matters under the warrant agreement that we and the
warrant agent deem necessary or desirable, so long as, in each
case, such amendments or supplements do not materially adversely
affect the interests of the holders of the warrants.
Warrant
Adjustments
Unless the applicable prospectus supplement states otherwise,
the exercise price of, and the number of securities covered by,
an ordinary share warrant will be adjusted proportionately if we
subdivide or combine our ordinary shares, as applicable. In
addition, unless the prospectus supplement states otherwise, if
we, without payment:
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issue ordinary shares or other securities convertible into or
exchangeable for ordinary shares, or any rights to subscribe
for, purchase or otherwise acquire any of the foregoing, as a
dividend or distribution to all or substantially all holders of
our ordinary shares;
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pay any cash to all or substantially all holders of our ordinary
shares, other than a cash dividend paid out of our current or
retained earnings;
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issue any evidence of our indebtedness or rights to subscribe
for or purchase our indebtedness to all or substantially all
holders of our ordinary shares; or
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issue ordinary shares or additional shares or other securities
or property to all or substantially all holders of our ordinary
shares by way of spinoff,
split-up,
reclassification, combination of shares or similar corporate
rearrangement,
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then the holders of ordinary share warrants will be entitled to
receive upon exercise of the warrants, in addition to the
securities otherwise receivable upon exercise of the warrants
and without paying any additional consideration, the amount of
shares and other securities and property such holders would have
been entitled to receive had they held the ordinary shares
issuable under the warrants on the dates on which holders of
those securities received or became entitled to receive such
additional shares and other securities and property.
Except as stated above, the exercise price and number of
securities covered by an ordinary share warrant, and the amounts
of other securities or property to be received, if any, upon
exercise of those warrants, will not be adjusted or provided for
if we issue those securities or any securities convertible into
or exchangeable for those securities, or securities carrying the
right to purchase those securities or securities convertible
into or exchangeable for those securities.
Holders of ordinary share warrants may have additional rights
under the following circumstances:
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certain reclassifications, capital reorganizations or changes of
the ordinary shares;
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certain share exchanges, mergers, or similar transactions
involving us and which result in changes of the ordinary
shares; or
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certain sales or dispositions to another entity of all or
substantially all of our property and assets.
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If one of the above transactions occurs and holders of our
ordinary shares are entitled to receive shares, securities or
other property with respect to or in exchange for their
securities, the holders of the ordinary share warrants then
outstanding, as applicable, will be entitled to receive upon
exercise of their warrants the kind and amount of shares and
other securities or property that they would have received upon
the applicable transaction if they had exercised their warrants
immediately before the transaction.
DESCRIPTION
OF RIGHTS
The following description, together with the additional
information we include in any applicable prospectus supplement,
summarizes the general features of the rights that we may offer
under this prospectus. We may issue rights to our shareholders
to purchase our ordinary shares
and/or any
of the other securities offered hereby. Each series of rights
will be issued under a separate rights agreement to be entered
into between us and a bank or trust company, as rights agent.
When we issue rights, we will provide the specific terms of the
rights and the applicable rights agreement in a prospectus
supplement. Because the terms of any rights we offer under a
prospectus supplement may differ from the terms we describe
below, you should rely solely on information in the applicable
prospectus supplement if that summary is different from the
summary in this prospectus. We will incorporate by reference
into the registration statement of which this prospectus is a
part the form of rights agreement that describes the terms of
the series of rights we are offering before the issuance of the
related series of rights.
If we offer any series of rights, certain terms of that series
of rights will be described in the applicable prospectus
supplement, including, without limitation, the following:
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the date of determining the shareholders entitled to the rights
distribution;
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the securities purchasable upon exercise of the rights;
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the exercise price;
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the aggregate number of rights issued;
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the date, if any, on and after which the rights will be
separately transferable;
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the date on which the right to exercise the rights will
commence, and the date on which the right will expire;
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a discussion of certain United States federal income tax
considerations applicable to the rights; and
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any other terms of the rights, including terms, procedures and
limitations relating to the distribution, exchange and exercise
of the rights.
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Each right will entitle the holder of rights to purchase for
cash the securities at the exercise price provided in the
applicable prospectus supplement. Rights may be exercised at any
time up to the close of business on the expiration date for the
rights provided in the applicable prospectus supplement. After
the close of business on the expiration date, all unexercised
rights will be void.
Holders may exercise rights as described in the applicable
prospectus supplement. Upon receipt of payment and the rights
certificate properly completed and duly executed at the
corporate trust office of the rights agent or any other office
indicated in the prospectus supplement, we will, as soon as
practicable, forward the securities purchasable upon exercise of
the rights. If less than all of the rights issued in any rights
offering are exercised, we may offer any unsubscribed securities
directly to persons other than shareholders, to or through
agents, underwriters or dealers or through a combination of such
methods, including pursuant to standby underwriting
arrangements, as described in the applicable prospectus
supplement.
DESCRIPTION
OF PURCHASE CONTRACTS
The following description, together with the additional
information we include in any applicable prospectus supplement,
summarizes the general features of the purchase contracts that
we may offer under this prospectus. While the features we have
summarized below will generally apply to any future purchase
contracts we may offer under this prospectus, we will describe
the particular terms of any purchase contracts that we may offer
in more detail in the applicable prospectus supplement. The
specific terms of any purchase contracts may differ from the
description provided below as a result of negotiations with
third parties in connection with the issuance of those purchase
contracts, as well as for other reasons. Because the terms of
any purchase contracts we offer under a prospectus supplement
may differ from the terms we describe below, you should rely
solely on information in the applicable prospectus supplement if
that summary is different from the summary in this prospectus.
We will incorporate by reference into the registration statement
of which this prospectus is a part the form of any purchase
contract that we may offer under this prospectus before the sale
of the related purchase contract. We urge you to read the
applicable prospectus supplements related to the specific
purchase contracts being offered, as well as the complete
instruments that contain the terms of the securities that are
subject to those purchase contracts. Certain of those
instruments, or forms of those instruments, have been filed as
exhibits to the registration statement of which this prospectus
is a part, and supplements to those instruments or forms may be
incorporated by reference into the registration statement of
which this prospectus is a part from reports we file with the
SEC.
We may issue purchase contracts, including contracts obligating
holders to purchase from us, and for us to sell to holders, a
specific or variable number of our, or an unaffiliated
entitys, securities at a future date or dates.
Alternatively, the purchase contracts may obligate us to
purchase from holders, and obligate holders to sell to us, a
specific or varying number of our securities. When we issue
purchase contracts, we will provide the specific terms of the
purchase contracts in a prospectus supplement. A copy of the
applicable form of purchase contract will be included as an
exhibit to a report we file with the SEC incorporated by
reference herein.
If we offer any purchase contracts, certain terms of that series
of purchase contracts will be described in the applicable
prospectus supplement, including, without limitation, the
following:
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the price of the securities or other property subject to the
purchase contracts (which may be determined by reference to a
specific formula described in the purchase contracts);
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whether the purchase contracts are issued separately, or as a
part of units each consisting of a purchase contract and one or
more of our other securities or securities of an unaffiliated
entity, including U.S. Treasury securities, securing the
holders obligations under the purchase contract;
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any requirement for us to make periodic payments to holders or
vice versa, and whether the payments are unsecured or
prefunded;
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any provisions relating to any security provided for the
purchase contracts;
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whether the purchase contracts obligate the holder or us to
purchase or sell, or both purchase and sell, the securities
subject to purchase under the purchase contract, and the nature
and amount of each of those securities, or the method of
determining those amounts;
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whether the purchase contracts are to be prepaid or not;
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whether the purchase contracts are to be settled by delivery, or
by reference or linkage to the value, performance or level of
the securities subject to purchase under the purchase contract;
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any acceleration, cancellation, termination or other provisions
relating to the settlement of the purchase contracts;
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a discussion of certain United States federal income tax
considerations applicable to the purchase contracts;
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whether the purchase contracts will be issued in fully
registered or global form; and
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any other terms of the purchase contracts and any securities
subject to such purchase contracts.
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DESCRIPTION
OF UNITS
The following description, together with the additional
information we include in any applicable prospectus supplement,
summarizes the general features of the units that we may offer
under this prospectus. We may issue units consisting of two or
more other constituent securities. These units may be issuable
as, and for a specified period of time may be transferable only
as a single security, rather than as the separate constituent
securities comprising such units. While the features we have
summarized below will generally apply to any units we may offer
under this prospectus, we will describe the particular terms of
any units that we may offer in more detail in the applicable
prospectus supplement. The specific terms of any units may
differ from the description provided below as a result of
negotiations with third parties in connection with the issuance
of those units, as well as for other reasons. Because the terms
of any units we offer under a prospectus supplement may differ
from the terms we describe below, you should rely solely on
information in the applicable prospectus supplement if that
summary is different from the summary in this prospectus.
We urge you to read the applicable prospectus supplement related
to the specific units being offered, as well as the complete
instruments that contain the terms of the securities that
comprise those units. Certain of those instruments, or forms of
those instruments, have been or will be filed as exhibits to the
registration statement of which this prospectus is a part, and
supplements to those instruments or forms may be incorporated by
reference into the registration statement of which this
prospectus is a part from reports we file with the SEC.
If we offer any units, certain terms of that series of units
will be described in the applicable prospectus supplement,
including, without limitation, the following, as applicable:
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the title of the series of units;
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identification and description of the separate constituent
securities comprising the units;
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the price or prices at which the units will be issued;
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the date, if any, on and after which the constituent securities
comprising the units will be separately transferable;
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a discussion of certain United States federal income tax
considerations applicable to the units; and
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any other terms of the units and their constituent securities.
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GLOBAL
SECURITIES
Book-Entry,
Delivery and Form
Unless we indicate differently in a prospectus supplement, the
securities initially will be issued in book-entry form and
represented by one or more global notes or global securities,
or, collectively, global securities. The global securities will
be deposited with, or on behalf of, The Depository
Trust Company, New York, New York, as depositary, or DTC,
and registered in the name of Cede & Co., the nominee
of DTC. Unless and until it is exchanged for individual
certificates evidencing securities under the limited
circumstances described below, a global security may not be
transferred except as a whole by the depositary to its nominee
or by the nominee to the depositary, or by the depositary or its
nominee to a successor depositary or to a nominee of the
successor depositary.
DTC has advised us that it is:
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a limited-purpose trust company organized under the New York
Banking Law;
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a banking organization within the meaning of the New
York Banking Law;
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a member of the Federal Reserve System;
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a clearing corporation within the meaning of the New
York Uniform Commercial Code; and
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a clearing agency registered pursuant to the
provisions of Section 17A of the Exchange Act.
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DTC holds securities that its participants deposit with DTC. DTC
also facilitates the settlement among its participants of
securities transactions, such as transfers and pledges, in
deposited securities through electronic computerized book-entry
changes in participants accounts, thereby eliminating the
need for physical movement of securities certificates.
Direct participants in DTC include securities
brokers and dealers, including underwriters, banks, trust
companies, clearing corporations and other organizations. DTC is
a wholly-owned subsidiary of The Depository Trust &
Clearing Corporation, or DTCC. DTCC is the holding company for
DTC, National Securities Clearing Corporation and Fixed Income
Clearing Corporation, all of which are registered clearing
agencies. DTCC is owned by the users of its regulated
subsidiaries. Access to the DTC system is also available to
others, which we sometimes refer to as indirect participants,
that clear through or maintain a custodial relationship with a
direct participant, either directly or indirectly. The rules
applicable to DTC and its participants are on file with the SEC.
Purchases of securities under the DTC system must be made by or
through direct participants, which will receive a credit for the
securities on DTCs records. The ownership interest of the
actual purchaser of a security, which we sometimes refer to as a
beneficial owner, is in turn recorded on the direct and indirect
participants records. Beneficial owners of securities will
not receive written confirmation from DTC of their purchases.
However, beneficial owners are expected to receive written
confirmations providing details of their transactions, as well
as periodic statements of their holdings, from the direct or
indirect participants through which they purchased securities.
Transfers of ownership interests in global securities are to be
accomplished by entries made on the books of participants acting
on behalf of beneficial owners. Beneficial owners will not
receive certificates representing their ownership interests in
the global securities, except under the limited circumstances
described below.
To facilitate subsequent transfers, all global securities
deposited by direct participants with DTC will be registered in
the name of DTCs partnership nominee, Cede &
Co., or such other name as may be requested by an authorized
representative of DTC. The deposit of securities with DTC and
their registration in the name of Cede & Co. or such
other nominee will not change the beneficial ownership of the
securities. DTC has no knowledge of the actual beneficial owners
of the securities. DTCs records reflect only the identity
of the direct participants to whose accounts the securities are
credited, which may or may not be the beneficial owners. The
participants are responsible for keeping account of their
holdings on behalf of their customers.
So long as the securities are in book-entry form, you will
receive payments and may transfer securities only through the
facilities of the depositary and its direct and indirect
participants. We will maintain an office or agency in the
location specified in the prospectus supplement for the
applicable securities, where notices and demands in respect of
the securities and the indenture may be delivered to us and
where certificated securities may be surrendered for payment,
registration of transfer or exchange.
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Conveyance of notices and other communications by DTC to direct
participants, by direct participants to indirect participants
and by direct participants and indirect participants to
beneficial owners will be governed by arrangements among them,
subject to any legal requirements in effect from time to time.
Redemption notices will be sent to DTC. If less than all of the
securities of a particular series are being redeemed, DTCs
practice is to determine by lot the amount of the interest of
each direct participant in the securities of such series to be
redeemed.
Neither DTC nor Cede & Co. (or such other DTC
nominee) will consent or vote with respect to the securities.
Under its usual procedures, DTC will mail an omnibus proxy to us
as soon as possible after the record date. The omnibus proxy
assigns the consenting or voting rights of Cede & Co.
to those direct participants to whose accounts the securities of
such series are credited on the record date, identified in a
listing attached to the omnibus proxy.
So long as securities are in book-entry form, we will make
payments on those securities to the depositary or its nominee,
as the registered owner of such securities, by wire transfer of
immediately available funds. If securities are issued in
definitive certificated form under the limited circumstances
described below, we will have the option of making payments by
check mailed to the addresses of the persons entitled to payment
or by wire transfer to bank accounts in the United States
designated in writing to the applicable trustee or other
designated party at least 15 days before the applicable
payment date by the persons entitled to payment.
Redemption proceeds, distributions and dividend payments on the
securities will be made to Cede & Co., or such other
nominee as may be requested by an authorized representative of
DTC. DTCs practice is to credit direct participants
accounts upon DTCs receipt of funds and corresponding
detail information from us on the payment date in accordance
with their respective holdings shown on DTC records. Payments by
participants to beneficial owners will be governed by standing
instructions and customary practices, as is the case with
securities held for the account of customers in bearer form or
registered in street name. Those payments will be
the responsibility of participants and not of DTC or us, subject
to any statutory or regulatory requirements in effect from time
to time. Payment of redemption proceeds, distributions and
dividend payments to Cede & Co., or such other nominee
as may be requested by an authorized representative of DTC, is
our responsibility, disbursement of payments to direct
participants is the responsibility of DTC, and disbursement of
payments to the beneficial owners is the responsibility of
direct and indirect participants.
Except under the limited circumstances described below,
purchasers of securities will not be entitled to have securities
registered in their names and will not receive physical delivery
of securities. Accordingly, each beneficial owner must rely on
the procedures of DTC and its participants to exercise any
rights under the securities and the indenture.
The laws of some jurisdictions may require that some purchasers
of securities take physical delivery of securities in definitive
form. Those laws may impair the ability to transfer or pledge
beneficial interests in securities.
DTC may discontinue providing its services as securities
depository with respect to the securities at any time by giving
reasonable notice to us. Under such circumstances, in the event
that a successor depository is not obtained, securities
certificates are required to be printed and delivered.
As noted above, beneficial owners of a particular series of
securities generally will not receive certificates representing
their ownership interests in those securities. However, if:
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DTC notifies us that it is unwilling or unable to continue as a
depositary for the global security or securities representing
such series of securities or if DTC ceases to be a clearing
agency registered under the Exchange Act at a time when it is
required to be registered and a successor depositary is not
appointed within 90 days of the notification to us or of
our becoming aware of DTCs ceasing to be so registered, as
the case may be;
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we determine, in our sole discretion, not to have such
securities represented by one or more global securities; or
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an Event of Default has occurred and is continuing with respect
to such series of securities,
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we will prepare and deliver certificates for such securities in
exchange for beneficial interests in the global securities. Any
beneficial interest in a global security that is exchangeable
under the circumstances described in the
37
preceding sentence will be exchangeable for securities in
definitive certificated form registered in the names that the
depositary directs. It is expected that these directions will be
based upon directions received by the depositary from its
participants with respect to ownership of beneficial interests
in the global securities.
We have obtained the information in this section and elsewhere
in this prospectus concerning DTC and DTCs book-entry
system from sources that are believed to be reliable, but we
take no responsibility for the accuracy of this information.
SELLING
SECURITYHOLDERS
If the registration statement of which this prospectus forms a
part is used by selling securityholders for the resale of any
securities registered thereunder pursuant to a registration
rights agreement between us and such selling securityholders or
otherwise, information about such selling securityholders, their
beneficial ownership of our securities and their relationship
with us will be set forth in a prospectus supplement, in a
post-effective amendment, or in filings we make with the SEC
under the Exchange Act that are incorporated by reference into
such registration statement.
PLAN OF
DISTRIBUTION
We, or selling securityholders, may sell the securities from
time to time pursuant to underwritten public offerings,
negotiated transactions, block trades or a combination of these
methods or through underwriters or dealers, through agents
and/or
directly to one or more purchasers. The securities may be
distributed from time to time in one or more transactions:
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at a fixed price or prices, which may be changed;
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at market prices prevailing at the time of sale;
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at prices related to such prevailing market prices; or
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at negotiated prices.
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Each time that we sell securities covered by this prospectus, we
will provide a prospectus supplement or supplements that will
describe the method of distribution and set forth the terms and
conditions of the offering of such securities, including the
offering price of the securities and the proceeds to us
and/or the
selling securityholders, if applicable.
Offers to purchase the securities being offered by this
prospectus may be solicited directly. Agents may also be
designated to solicit offers to purchase the securities from
time to time. Any agent involved in the offer or sale of our
securities will be identified in a prospectus supplement.
If a dealer is utilized in the sale of the securities being
offered by this prospectus, the securities will be sold to the
dealer, as principal. The dealer may then resell the securities
to the public at varying prices to be determined by the dealer
at the time of resale.
If an underwriter is utilized in the sale of the securities
being offered by this prospectus, an underwriting agreement will
be executed with the underwriter at the time of sale and the
name of any underwriter will be provided in the prospectus
supplement that the underwriter will use to make resales of the
securities to the public. In connection with the sale of the
securities, we, or selling securityholders, or the purchasers of
securities for whom the underwriter may act as agent, may
compensate the underwriter in the form of underwriting discounts
or commissions. The underwriter may sell the securities to or
through dealers, and those dealers may receive compensation in
the form of discounts, concessions or commissions from the
underwriters
and/or
commissions from the purchasers for which they may act as agent.
Unless otherwise indicated in a prospectus supplement, an agent
will be acting on a best efforts basis and a dealer will
purchase securities as a principal, and may then resell the
securities at varying prices to be determined by the dealer.
Any compensation paid to underwriters, dealers or agents in
connection with the offering of the securities, and any
discounts, concessions or commissions allowed by underwriters to
participating dealers will be provided in the
38
applicable prospectus supplement. Underwriters, dealers and
agents participating in the distribution of the securities may
be deemed to be underwriters within the meaning of the
Securities Act, and any discounts and commissions received by
them and any profit realized by them on resale of the securities
may be deemed to be underwriting discounts and commissions. We
may enter into agreements to indemnify underwriters, dealers and
agents against civil liabilities, including liabilities under
the Securities Act, or to contribute to payments they may be
required to make in respect thereof and to reimburse those
persons for certain expenses.
The securities may or may not be listed on a national securities
exchange. To facilitate the offering of securities, certain
persons participating in the offering may engage in transactions
that stabilize, maintain or otherwise affect the price of the
securities. This may include over-allotments or short sales of
the securities, which involve the sale by persons participating
in the offering of more securities than were sold to them. In
these circumstances, these persons would cover such
over-allotments or short positions by making purchases in the
open market or by exercising their over-allotment option, if
any. In addition, these persons may stabilize or maintain the
price of the securities by bidding for or purchasing securities
in the open market or by imposing penalty bids, whereby selling
concessions allowed to dealers participating in the offering may
be reclaimed if securities sold by them are repurchased in
connection with stabilization transactions. The effect of these
transactions may be to stabilize or maintain the market price of
the securities at a level above that which might otherwise
prevail in the open market. These transactions may be
discontinued at any time.
If indicated in the applicable prospectus supplement,
underwriters or other persons acting as agents may be authorized
to solicit offers by institutions or other suitable purchasers
to purchase the securities at the public offering price set
forth in the prospectus supplement, pursuant to delayed delivery
contracts providing for payment and delivery on the date or
dates stated in the prospectus supplement. These purchasers may
include, among others, commercial and savings banks, insurance
companies, pension funds, investment companies and educational
and charitable institutions. Delayed delivery contracts will be
subject to the condition that the purchase of the securities
covered by the delayed delivery contracts will not at the time
of delivery be prohibited under the laws of any jurisdiction in
the United States to which the purchaser is subject. The
underwriters and agents will not have any responsibility with
respect to the validity or performance of these contracts.
We may engage in at the market offerings into an existing
trading market in accordance with Rule 415(a)(4) under the
Securities Act. In addition, we may enter into derivative
transactions with third parties, or sell securities not covered
by this prospectus to third parties in privately negotiated
transactions. If the applicable prospectus supplement so
indicates, in connection with those derivatives, the third
parties may sell securities covered by this prospectus and the
applicable prospectus supplement, including in short sale
transactions. If so, the third party may use securities pledged
by us or borrowed from us or others to settle those sales or to
close out any related open borrowings of ordinary shares, and
may use securities received from us in settlement of those
derivatives to close out any related open borrowings of ordinary
shares. The third party in such sale transactions will be an
underwriter and, if not identified in this prospectus, will be
identified in the applicable prospectus supplement (or a
post effective amendment). In addition, we may
otherwise loan or pledge securities to a financial institution
or other third party that in turn may sell the securities short
using this prospectus and an applicable prospectus supplement.
Such financial institution or other third party may transfer its
economic short position to investors in our securities or in
connection with a concurrent offering of other securities.
The specific terms of any
lock-up
provisions in respect of any given offering will be described in
the applicable prospectus supplement.
The underwriters, dealers and agents may engage in transactions
with us, or perform services for us, in the ordinary course of
business for which they receive compensation.
39
LEGAL
MATTERS
Certain legal matters relating to the issuance and sale of the
securities with respect to Singapore law will be passed upon for
us by WongPartnership LLP. Certain legal matters relating to the
issuance and sale of the securities with respect to
U.S. law will be passed upon for us by Latham &
Watkins LLP, Menlo Park, California. Partners of
Latham & Watkins LLP, members of their respective
families, related persons and others have an indirect interest,
through limited partnerships that are investors in funds
affiliated with KKR, in less than 1% of our ordinary shares.
EXPERTS
The consolidated financial statements incorporated in this
prospectus by reference to the Annual Report on
Form 10-K
for the fiscal year ended November 1, 2009 have been so
incorporated in reliance on the report of PricewaterhouseCoopers
LLP, an independent registered public accounting firm, given on
the authority of said firm as experts in auditing and accounting.
40
25,000,000 Shares
Ordinary Shares
PROSPECTUS SUPPLEMENT
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Deutsche
Bank Securities |
Barclays Capital |
Citi |
May 31, 2011