SMOD Smart Modular Technologies (Wwh), Inc. (MM)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

SCHEDULE 14A

PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934

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Filed by a Party other than the Registrant o

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þ		Preliminary Proxy Statement
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o		Definitive Proxy Statement
o		Definitive Additional Materials
o		Soliciting Material Under Rule 14a-12

SMART MODULAR TECHNOLOGIES (WWH), INC.

(Name of Registrant as Specified in its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

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(1)

Title of each class of securities to which transaction applies: SMART Modular Technologies (WWH), Inc., ordinary shares, par value US$0.00016667 (“Common Stock”)

(2)

Aggregate number of securities to which transaction applies: 66,098,205 shares of Common Stock (including restricted stock units) and 7,213,931 shares of Common Stock underlying outstanding options of the Company with an exercise price of $9.25 or less

	(3)		Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
			The proposed maximum aggregate value of the transaction for purposes of calculating the filing fee is $646,035,265. The maximum aggregate value of the transaction was calculated based upon the sum of (A) (1) 66,098,205 shares of Common Stock (including restricted stock units) issued and outstanding and owned by persons other than the Company on April 26, 2011, multiplied (2) by $9.25 (the “per share Merger consideration”) and (B) (1) 7,213,931 shares of Common Stock underlying outstanding options of the Company with an exercise price of $9.25 or less, as of April 26, 2011, multiplied by (2) the excess of the per share Merger consideration over the weighted average exercise price of $4.45. The filing fee equals the product of 0.00011610 multiplied by the maximum aggregate value of the transaction.

(4)

Proposed maximum aggregate value of transaction: $646,035,265

(5)

Total fee paid: $75,005

o		Fee paid previously with preliminary materials.
o		Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the form or schedule and the date of its filing.

(1)

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Form, Schedule or Registration Statement No.:

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(4)

Date Filed:

 

 

SMART MODULAR TECHNOLOGIES (WWH), INC.
39870 Eureka Drive
Newark, California 94560

 

[ • ], 2011

 

To the Shareholders of SMART Modular Technologies (WWH), Inc.:

 

You are cordially invited to attend an extraordinary general meeting of shareholders of SMART Modular Technologies (WWH), Inc., a Cayman Islands exempted company (“SMART,” the “Company,” “we,” “us” or “our”), to be held at [ • ], local time, on [ • ], 2011, at [ • ].

 

On April 26, 2011, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Saleen Holdings, Inc., a Cayman Islands exempted company (“Parent”), and Saleen Acquisition, Inc., a Cayman Islands exempted company (“Merger Sub”). Pursuant to the Merger Agreement, Merger Sub will be merged with and into the Company pursuant to a plan of merger (the “Plan of Merger”) and the separate corporate existence of Merger Sub will thereupon cease with the Company surviving the merger as a wholly owned subsidiary of Parent (the “Merger”). Parent and Merger Sub were formed by Silver Lake Partners III, L.P. and Silver Lake Sumeru Fund, L.P. (collectively, the “U.S. Sponsors”). Silver Lake Partners III Cayman (AIV III), L.P. and Silver Lake Sumeru Fund Cayman, L.P. (collectively, the “Cayman Sponsors”) are expected to fund all or a portion of the equity financing of Parent at the closing of the Merger and, accordingly, the Cayman Sponsors will own all or a part of the share capital of Parent (other than share capital issued to certain employees who will separately invest in the equity of Parent). The U.S. Sponsors and Cayman Sponsors are collectively referred to herein as the “Sponsors.”

 

At the effective time of the Merger, each outstanding ordinary share (“Common Stock”) of the Company (other than treasury shares, shares owned by Parent or Merger Sub, shares owned by any of the Company’s wholly owned subsidiaries and shares held by any shareholders who are entitled to and who properly exercise appraisal and dissention rights under Cayman Islands law) will be converted into the right to receive $9.25 in cash, without interest and less any applicable withholding taxes (the “Merger Consideration”).

 

A special committee of our Board of Directors (“Special Committee”), consisting entirely of independent and disinterested directors, reviewed and considered the terms and conditions of the Merger Agreement and the transactions contemplated thereby, including the Merger. Our Special Committee unanimously determined that the Merger Agreement and the transactions contemplated thereby, including the Merger, are advisable, fair (both substantively and procedurally) to and in the best interests of the Company as a whole and our unaffiliated shareholders and recommended that our Board of Directors approve and declare the Merger Agreement and the transactions contemplated thereby, including the Merger, advisable, fair (both substantively and procedurally) to and in the best interests of the Company as a whole and our unaffiliated shareholders and recommend that our shareholders, including our unaffiliated shareholders, approve as a special resolution the authorization, approval and adoption of the Merger Agreement, and such other actions as may be necessary to effectuate the transactions contemplated thereby, including the Merger (such special resolution, the “Merger Proposal”). Our Board of Directors, after careful consideration, and acting upon the unanimous recommendation of our Special Committee, unanimously (with two directors abstaining) approved and declared the Merger Agreement and the transactions contemplated thereby, including the Merger, advisable, fair (both substantively and procedurally) to and in the best interests of the Company as a whole and our unaffiliated shareholders and recommended that our shareholders, including our unaffiliated shareholders, approve the Merger Proposal at the extraordinary general meeting. Our Special Committee and our Board of Directors both recommend that you vote “FOR” the Merger Proposal .

 

Mr. Iain MacKenzie, our President and Chief Executive Officer, as well as certain other members of our management, have agreed with Parent to make an equity investment in Parent. We refer to any such employees

who have agreed, or agree, to invest in Parent and any other members of our management team who may have the opportunity to invest in Parent and choose to do so as the “Rollover Investors.” In addition, it is our expectation that, concurrently with the closing of the Merger, Mr. Ajay Shah, Chairman of our Board of Directors and a Managing Director of Silver Lake Sumeru, (and his estate planning entities over which he has management and investment powers) will contribute his and his estate planning entities’ shares of Common Stock to Parent in exchange for equity securities of Parent on substantially similar terms as the Rollover Investors.

 

In considering the recommendation of our Special Committee and Board of Directors, you should be aware that some of the Company’s directors and executive officers have interests in the Merger that are different from, or in addition to, the interests of our shareholders generally. We encourage you to read the accompanying proxy statement in its entirety because it explains the proposed Merger, the documents related to the Merger and other related matters.

 

The Merger cannot be completed unless the Merger Proposal is approved by the affirmative vote of the holders of at least two thirds of the Common Stock attending a duly convened shareholders meeting of the Company (in person or by proxy) voting by poll. More information about the Merger Proposal is contained in the accompanying proxy statement and a copy of the Agreement and Plan of Merger is attached thereto as Annex A .

 

Regardless of the number of shares of Common Stock you own, your vote is very important. Whether or not you plan to attend the extraordinary general meeting, please take the time to submit a proxy by following the instructions on your proxy card as soon as possible. If your shares of Common Stock are held in an account at a broker, dealer, commercial bank, trust company or other nominee, you should instruct your broker, dealer, commercial bank, trust company or other nominee how to vote in accordance with the voting instruction form furnished by your broker, dealer, commercial bank, trust company or other nominee.

 

Sincerely,

 

Iain MacKenzie

President and Chief Executive Officer

 

The Merger has not been approved or disapproved by the Securities and Exchange Commission or any state securities commission. Neither the Securities and Exchange Commission nor any state securities commission has passed upon the merits or fairness of the Merger or upon the adequacy or accuracy of the information contained in this document or the accompanying proxy statement. Any representation to the contrary is a criminal offense.

 

The accompanying proxy statement is dated [ • ], 2011 and is first being mailed to shareholders on or about [ • ], 2011.

SMART MODULAR TECHNOLOGIES (WWH), INC.

 

NOTICE OF EXTRAORDINARY GENERAL MEETING OF SHAREHOLDERS

TO BE HELD [ • ], 2011

 

NOTICE IS HEREBY GIVEN that the extraordinary general meeting of shareholders of SMART Modular Technologies (WWH), Inc., a Cayman Islands exempted company (“SMART,” the “Company,” “we,” “us” or “our”) will be held at [ • ], local time, on [ • ], 2011, at [ • ], for the following purposes:

 

1. To approve as a special resolution the authorization, approval and adoption of the Agreement and Plan of Merger, dated April 26, 2011 (the “Merger Agreement”) by and among the Company, Saleen Holdings, Inc., a Cayman Islands exempted company (“Parent”) and Saleen Acquisition, Inc., a Cayman Islands exempted company (“Merger Sub”), whereby Merger Sub will be merged with and into the Company pursuant to a plan of merger (the “Plan of Merger”) and the separate corporate existence of Merger Sub will thereupon cease, with the Company surviving the Merger as a wholly owned subsidiary of Parent (the “Merger”) and such other actions as may be necessary to effectuate the transactions contemplated thereby, including the Merger (such special resolution, the “Merger Proposal”);

 

2. To hold an advisory (nonbinding) vote on the compensation of our executive officers that is based on or otherwise relates to the Merger, as described in the proxy statement; and

 

3. To approve the adjournment of the extraordinary general meeting, if necessary or appropriate, to solicit additional proxies if there are not sufficient votes at the time of the extraordinary general meeting to approve the Merger Proposal.

 

For more information about the Merger Proposal, please review the accompanying proxy statement and the Merger Agreement and Plan of Merger attached thereto as Annex A .

 

A special committee of our Board of Directors (“Special Committee”), consisting entirely of independent and disinterested directors, reviewed and considered the terms and conditions of the Merger Agreement and the transactions contemplated thereby, including the Merger. Our Special Committee unanimously determined that the Merger Agreement and the transactions contemplated thereby, including the Merger, are advisable, fair (both substantively and procedurally) to and in the best interests of the Company as a whole and our unaffiliated shareholders and recommended that our Board of Directors approve and declare the Merger Agreement and the transactions contemplated thereby, including the Merger, advisable, fair (both substantively and procedurally) to and in the best interests of the Company as a whole and our unaffiliated shareholders and recommend that our shareholders, including our unaffiliated shareholders, approve the Merger Proposal. Our Board of Directors, after careful consideration, and acting upon the unanimous recommendation of our Special Committee, unanimously (with two directors abstaining) approved and declared the Merger Agreement and the transactions contemplated thereby, including the Merger, advisable, fair (both substantively and procedurally) to and in the best interests of the Company as a whole and our unaffiliated shareholders and recommended that our shareholders, including our unaffiliated shareholders, approve the Merger Proposal at the extraordinary general meeting. Our Special Committee and our Board of Directors both recommend that you vote “FOR” the Merger Proposal .

 

The Merger cannot be completed unless the Merger Proposal is approved by the affirmative vote of the holders of at least two thirds of our ordinary shares (“Common Stock”) attending a duly convened shareholders meeting of the Company (in person or by proxy) voting by poll.

 

Whether or not you plan to attend the extraordinary general meeting, please take the time to submit a proxy by following the instructions on your proxy card as soon as possible. If your shares of Common Stock are held in an account at a broker, dealer, commercial bank, trust company or other nominee, you should instruct your broker, dealer, commercial bank, trust company or other nominee how to vote in accordance with the voting instruction form furnished by your broker, dealer, commercial bank, trust company or other nominee.

Company shareholders will have the right to seek appraisal and receive the fair value of their shares in lieu of receiving the per share Merger consideration if the Merger closes but only if they properly exercise their appraisal and dissention rights by complying with the required procedures under Cayman Islands law.

 

If you plan to attend the extraordinary general meeting, please note that you may be asked to present valid photo identification, such as a driver’s license or passport. If you wish to attend the extraordinary general meeting and your shares of Common Stock are held in an account at a broker, dealer, commercial bank, trust company or other nominee (i.e., in “street name”), you will need to bring a copy of your voting instruction card or statement reflecting your share ownership as of [ • ], 2011, the record date.

 

BY ORDER OF THE BOARD OF DIRECTORS

 

Bruce M. Goldberg

Vice President, Chief Legal and Chief Compliance

Officer and Corporate Secretary

 

Newark, California

[ • ], 2011

 

Important Notice of Internet Availability

 

This proxy statement for the extraordinary general meeting to be held on [ • ], 2011, is available free of charge at http://www.[ • ].

 

 

SUMMARY VOTING INSTRUCTIONS

 

Ensure that your shares of Common Stock can be voted at the extraordinary general meeting by submitting your proxy or contacting your broker, dealer, commercial bank, trust company or other nominee.

 

If your shares of Common Stock are registered in the name of a broker, dealer, commercial bank, trust company or other nominee: check the voting instruction card forwarded by your broker, dealer, commercial bank, trust company or other nominee to see which voting options are available or contact your broker, dealer, commercial bank, trust company or other nominee in order to obtain directions as to how to ensure that your shares of Common Stock are voted at the extraordinary general meeting.

 

If your shares of Common Stock are registered in your name: submit your proxy as soon as possible by telephone, via the Internet or by signing, dating and returning the enclosed proxy card in the enclosed postage-prepaid envelope, so that your shares of Common Stock can be voted at the extraordinary general meeting.

 

Instructions regarding telephone and Internet voting are included on the proxy card.

 

If you sign, date and mail your proxy card without indicating how you wish to vote, your proxy will be voted in favor of the Merger Proposal, the advisory vote on the compensation of our executive officers that is based on or otherwise relates to the Merger and the proposal to adjourn the extraordinary general meeting, if necessary and appropriate, to solicit additional proxies.

 

If you have any questions, require assistance with voting your proxy card,
or need additional copies of proxy material, please call MacKenzie Partners
at the phone numbers listed below.

 

 

105 Madison Avenue

New York, NY 10016

 

proxy@mackenziepartners.com

 

(212) 929-5500 (Call Collect)

 

Or

 

TOLL-FREE (800) 322-2885

 

TABLE OF CONTENTS

 

 

SMART MODULAR TECHNOLOGIES (WWH), INC.

 

EXTRAORDINARY GENERAL MEETING OF SHAREHOLDERS

TO BE HELD [ • ], 2011

 

 

PROXY STATEMENT

 

 

We are providing these proxy materials to you in connection with the solicitation of proxies by the Board of Directors of SMART Modular Technologies (WWH), Inc. for an extraordinary general meeting of shareholders to be held on [ • ], 2011 and for any adjournment or postponement thereof. This Proxy Statement provides information that you should read before you vote on the proposals that will be presented to you at the extraordinary general meeting. The extraordinary general meeting will be held on [ • ], 2011 at [ • ], local time at [ • ].

 

On April 26, 2011, we entered into an Agreement and Plan of Merger among SMART, Merger Sub and Parent (the “Merger Agreement”), a copy of which is attached as Annex A to this proxy statement. This proxy statement and a proxy card are first being mailed on or about [ • ], 2011 to persons who owned shares of our Common Stock as of the close of business on [ • ], 2011.

 

In this proxy statement:

 

 

SMART Modular Technologies (WWH), Inc.   The Company is a Cayman Islands exempted company and is a leading independent designer, manufacturer and supplier of electronic subsystems to original equipment manufacturers, or OEMs. The Company offers more than 500 standard and custom products to OEMs engaged in the computer, enterprise, industrial, networking, gaming, telecommunications, defense, aerospace and embedded application markets. Taking innovations from the design stage through manufacturing and delivery, the Company has developed a comprehensive memory product line that includes DRAM, SRAM, and Flash memory in various form factors. The Company also offers high performance, high capacity solid state drives, or SSDs, for enterprise, defense, aerospace, industrial automation, medical, and transportation markets. The Company’s presence in the U.S., Europe, Asia, and Latin America enables it to provide its customers with proven expertise in international logistics, asset management, and supply-chain management worldwide.

 

Saleen Holdings, Inc.   Parent is a newly formed Cayman Islands exempted company that is currently controlled by Silver Lake Partners III, L.P. and Silver Lake Sumeru Fund, L.P. Parent’s sole purpose is to enter into the Merger Agreement and to complete the Merger with the Company. Parent has not carried on any activities to date, except for activities incidental to its formation and activities undertaken in connection with the transactions contemplated by the Merger Agreement.

 

Saleen Acquisition, Inc.   Merger Sub was formed by Parent solely for the purpose of completing the Merger with the Company. Merger Sub is a wholly owned subsidiary of Parent and has not carried on any activities to date, except for activities incidental to its incorporation and activities undertaken in connection with the transactions contemplated by the Merger Agreement.

 

On April 26, 2011, the Company entered into the Merger Agreement with Parent and Merger Sub. Upon the terms and subject to the conditions of the Merger Agreement, at the effective time of the Merger, Merger Sub will merge with and into the Company pursuant to the Plan of Merger, with the Company continuing as the surviving company. As a result, the Company will become a wholly owned subsidiary of Parent following the effective time of the Merger and the Common Stock will cease to be publicly traded on The NASDAQ Global Select Market. You will have no equity interest in the Company or Parent after the effective time of the Merger. At the effective time of the Merger (except as otherwise agreed by Parent and any holder of an option or a restricted stock unit to acquire Common Stock):

 

 

 

We currently anticipate that the Merger will be completed by the end of the third quarter of calendar 2011. However, there can be no assurances that the Merger will be completed at all, or if completed, that it will be completed by such date.

 

After consideration of various factors as discussed under “Special Factors — Reasons for the Merger; Recommendations of our Special Committee and our Board of Directors” beginning on page [ • ], our Special Committee, consisting entirely of independent and disinterested members of our Board of Directors who are not members of management of the Company or affiliated with the Sponsors or the Rollover Investors, unanimously determined that the Merger Agreement and the transactions contemplated thereby, including the Merger, are advisable, fair (both substantively and procedurally) to and in the best interests of the Company as a whole and its unaffiliated shareholders, and recommended that our Board of Directors approve and declare the Merger Agreement and the transactions contemplated thereby, including the Merger, advisable, fair (both substantively and procedurally) to and in the best interests of the Company as a whole and our unaffiliated shareholders and recommended that our shareholders, including our unaffiliated shareholders, approve the Merger Proposal.

 

After careful consideration and acting on the unanimous recommendation of our Special Committee and the other factors in the section titled “Special Factors— Reasons for the Merger; Recommendations of our Special Committee and our Board of Directors” beginning on page [ • ], our Board of Directors unanimously (with Mr. Ajay Shah who is affiliated with, and Mr. Mukesh Patel, who is an investor in, Silver Lake Sumeru Fund, L.P. abstaining), approved and declared the Merger Agreement and the transactions contemplated thereby, including the Merger, advisable, fair (both substantively and procedurally) to and in the best interest of the Company as a whole and its unaffiliated shareholders and recommended that our shareholders, including our unaffiliated shareholders, approve the Merger Proposal at the extraordinary general meeting.

 

For a discussion of the material factors considered by our Special Committee and our Board of Directors in reaching their conclusions, see “Special Factors — Reasons for the Merger; Recommendations of the Special Committee and our Board of Directors” beginning on page [ • ]. Our Special Committee and Board of Directors both recommend that you vote “FOR” the Merger Proposal .

 

You may vote at the extraordinary general meeting if you owned of record any shares of Common Stock at the close of business on [ • ], 2011, the record date for the extraordinary general meeting. On that date, there were [ • ] shares of Common Stock outstanding and entitled to vote at the extraordinary general meeting. You may cast one vote for each share of Common Stock that you owned on that date. Approval of the Merger Proposal requires the affirmative vote of the holders of at least two thirds of the Common Stock attending a duly convened shareholders meeting of the Company (in person or by proxy) voting by poll.

 

Barclays Capital Inc. (“Barclays”), the Special Committee’s financial advisor, delivered to the Special Committee an opinion, dated April 25, 2011, to the effect that, as of that date and based upon and subject to various assumptions and limitations described in Barclay’s opinion, the consideration to be offered to the Company’s shareholders (other than Parent and its affiliates) pursuant to the Merger was fair, from a financial point of view, to such holders. The full text of the written opinion of Barclays, which describes, among other things, the assumptions made, procedures followed, matters considered and limitations on the review

undertaken, is attached as Annex B to this proxy statement. Barclays provided its opinion to the Special Committee for the information and assistance of the Special Committee in connection with and for purposes of the Special Committee’s evaluation of the Merger Consideration from a financial point of view. Barclay’s opinion does not address any other aspect of the Merger and does not constitute a recommendation to any shareholder as to any action in connection with the Merger or any other matter. We encourage you to read the opinion of Barclays described above carefully in its entirety for a description of the procedures followed, assumptions made, matters considered and limitations on the review undertaken in connection with such opinion.

 

We estimate that the total amount of funds necessary to complete the Merger and the related transactions and financings, including the prepayment of the Company’s Senior Secured Floating Rate Notes due 2012 and payment of related fees and expenses, will be approximately $700 million. We expect this amount to be funded through a combination of the following:

 

 

Parent has obtained the equity and debt financing commitments described below. The funding under those commitments is subject to conditions, including conditions that do not relate directly to the Merger Agreement. Parent has represented to us that it has sufficient committed equity and debt financing to complete the transaction. Although obtaining the equity or debt financing is not a condition to the completion of the Merger, the failure of Parent and Merger Sub to obtain sufficient financing would likely result in the failure of the Merger to be completed. In that case, Parent may be obligated to pay the Company a fee of $58.1 million as described under “The Merger Agreement — Termination Fees” beginning on page [ • ]. Payment of such fee is guaranteed by the U.S. Sponsors. Such guarantees are described under “Special Factors — Limited Guarantees” .

 

Equity Financing

 

Parent has entered into a letter agreement, which we refer to as the equity commitment letter, with the U.S. Sponsors, dated as of April 26, 2011, pursuant to which the U.S. Sponsors have committed, severally but not jointly, upon the terms and subject to the conditions set forth in the equity commitment letter, to make capital contributions to Parent for an aggregate of up to $381 million. The U.S. Sponsors may assign their respective obligations to other investors, although no assignment of the equity commitment to other investors will affect the U.S. Sponsors’ commitment to make capital contributions pursuant to the equity commitment letter. The Cayman Sponsors are expected to fund all or a portion of the equity financing of Parent at the closing of the Merger and, accordingly, the Cayman Sponsors will own all or a part of the share capital of Parent (other than share capital issued to the Rollover Investors in connection with the rollover financing).

 

The U.S. Sponsors’ equity commitments are generally subject to the satisfaction of the conditions to Parent and Merger Sub’s obligations to effect the consummation of the Merger as set forth in the Merger Agreement and the substantially concurrent receipt of the proceeds of the debt financing described below.

Debt Financing

 

In connection with the Merger Agreement, Merger Sub obtained a debt commitment letter, dated as of April 26, 2011, from JPMorgan Chase Bank, N.A., J.P. Morgan Securities LLC, UBS Finance LLC and UBS Securities LLC, which we refer to collectively as the “lenders”, to provide, severally but not jointly, upon the terms and subject to the conditions set forth in the debt commitment letter, in the aggregate up to $350 million in debt financing (not all of which is expected to be drawn at the closing of the Merger) to one or more subsidiaries of the Company, consisting of (i) up to a $300 million senior secured first-lien term loan facility and (ii) up to a $50 million senior secured first-lien “first-out” revolving credit facility.

 

Rollover Financing

 

On April 25, 2011, Mr. MacKenzie and certain other Rollover Investors entered into agreements with Parent pursuant to which they collectively committed to invest an aggregate amount of $11,734,937 in Parent, which includes the following:

 

 

It is our expectation that, concurrently with the closing of the Merger, Mr. Shah (and his estate planning entities over which he has management and investment powers) will contribute his and his estate planning entities’ shares of Common Stock to Parent in exchange for equity securities of Parent on substantially similar terms as the Rollover Investors.

 

Go-Shop Period; Restrictions on Solicitations (page [ • ])

 

Until 11:59 p.m., New York City time, on June 10, 2011 (the “Go-Shop Period”) the Company is permitted to:

 

 

From and after 12:00 a.m., New York City time, on June 11, 2011, the Company is required to immediately cease any discussions or negotiations with any persons that may be ongoing with respect to any takeover proposals, except that the Company may continue to engage in the aforementioned activities with certain third parties that contacted the Company and made an alternative acquisition proposal during the Go-Shop Period that the Special Committee has determined constitutes or could reasonably be expected to lead to

a superior proposal (each, an “Excluded Party”). At any time from and after 12:00 a.m., New York City time, on June 11, 2011 and until the effective time of the Merger or, if earlier, the termination of the Merger Agreement, the Company, its subsidiaries and its representatives may not, subject to the preceding sentence:

 

 

Notwithstanding the foregoing, the Company may continue to engage in the activities permitted during the period prior to 11:59 p.m., New York City time, on June 10, 2011 described above with each Excluded Party. The Company must provide to Parent a copy of the takeover proposal made by any Excluded Party and a written summary of any material terms not made in writing.

 

At any time from and after 12:00 a.m., New York City time, on June 11, 2011 and prior to the time the Company’s shareholders approve the Merger Proposal, if the Company receives an unsolicited written takeover proposal from an Excluded Party or from any other person making or renewing a takeover proposal, the Company, if the Special Committee determines in good faith, after consultation with its financial advisor and outside legal counsel, that such takeover proposal either constitutes a superior proposal or is reasonably expected to result in a superior proposal, may:

 

 

Conditions to the Merger (page [ • ])

 

Each of the Company’s, Parent’s and Merger Sub’s obligation to complete the Merger is subject to the satisfaction or waiver of the following conditions:

 

 

In addition, Parent’s and Merger Sub’s obligation to complete the Merger is subject to the satisfaction or waiver of the following additional conditions:

 

 

 

In addition, the Company’s obligation to complete the Merger is subject to the satisfaction or waiver of the following additional conditions:

 

 

Notwithstanding the satisfaction of the above conditions, Parent is not obligated to complete the Merger until the expiration of a 20 consecutive day “marketing period” that Parent may use to complete its debt financing for the Merger. The 20 consecutive day “marketing period” begins to run after the Company has satisfied certain obligations under the Merger Agreement, including the delivery of certain financial information required by Parent to complete its contemplated debt financing for the Merger, and after the conditions to the closing of the Merger have been satisfied. Once commenced, the “marketing period” may terminate before its completion and be required to be re-commenced later under certain circumstances. See “The Merger Agreement — When the Merger Becomes Effective; Marketing Period” beginning on page [ • ].

 

Termination of the Merger Agreement (page [ • ])

 

The Merger Agreement may be terminated at any time upon the mutual written consent of the Company and Merger Sub. Other circumstances under which the Company or Merger Sub may terminate the Merger Agreement are described under “The Merger Agreement — Termination of the Merger Agreement” beginning on page [ • ].

 

Termination Fees and Reimbursement of Expenses (page [ • ])

 

If the Merger Agreement is terminated, in certain circumstances the Company may be required to pay Parent or its designees a termination fee of either $12.9 million or $19.4 million and reimburse certain out-of-pocket expenses of Parent up to $5 million (such reimbursement amount to be offset against any termination fee payable by the Company), and in certain other circumstances Parent may be required to pay the Company a termination fee of $58.1 million. The specific circumstances in which termination fees are payable are described under “The Merger Agreement — Termination Fees” beginning on page [ • ].

Remedies (page [ • ])

 

In the event that the $12.9 million termination fee or the $19.4 million termination fee is paid by us, such payment will be the sole and exclusive remedy of Parent, Merger Sub and each of their respective affiliates against the Company and any of its former, current and future affiliates, and each of their respective directors, officers, employees, shareholders, controlling persons or representatives for any loss or damage based upon, arising out of or relating to the Merger Agreement or the negotiation, execution or performance thereof or the transactions contemplated thereby. If no termination fee has been paid by the Company, Parent and Merger Sub are entitled to seek an injunction or injunctions, specific performance or other equitable relief against the Company to prevent breaches of the Merger Agreement in addition to any other remedy to which they are entitled under the Merger Agreement.

 

The Company’s receipt of the $58.1 million termination fee described above is the Company’s and its affiliates’ sole and exclusive remedy against Parent, Merger Sub, the Sponsors, any of their former, current and future direct or indirect equityholders, controlling persons, shareholders, directors, officers, employees, agents, affiliates, members, managers, general or limited partners, financing sources or assignees if Parent or Merger Sub fail to complete the Merger when required pursuant to the Merger Agreement for any or no reason or otherwise breach the Merger Agreement or fail to perform their obligations under the Merger Agreement. The Company is not entitled to seek an injunction or injunctions, specific performance or other equitable relief against Parent or Merger Sub to prevent breaches of the Merger Agreement.

 

Concurrently with the execution of the Merger Agreement, pursuant to limited guarantees delivered by each of the U.S. Sponsors in favor of the Company, each of the U.S. Sponsors, severally and not jointly, have unconditionally and irrevocably agreed to (i) guarantee the due and punctual payment, observance, performance and discharge of their respective portions of Parent’s payment obligations with respect to its termination fee described above, subject to the limitations set forth in the limited guarantees and the Merger Agreement, and (ii) the expense reimbursement obligations of Parent in connection with the costs and expenses incurred in connection with any suit to enforce the payment of the $58.1 million termination fee.

 

Each of the limited guarantees will terminate upon the earliest to occur of (i) the effective time of the Merger, (ii) receipt in full by the Company or its affiliates of the $58.1 million Parent termination fee, (iii) termination of the Merger Agreement in accordance with its terms (other than pursuant to which Parent would be obligated to make a payment of the Parent termination fee) and (iv) the first anniversary of any other termination of the Merger Agreement, except as to a claim for payment of the termination fee and expenses made on or prior to such first anniversary.

 

The Merger is subject to review by the U.S. Antitrust Division of the Department of Justice (the “Antitrust Division”) and the U.S. Federal Trade Commission (“FTC”) under the HSR Act. The HSR Act provides that transactions such as the Merger may not be completed until certain information and documents have been submitted to the Antitrust Division and the FTC and the applicable waiting period has expired or been terminated. On May 10, 2011, an affiliate of the Sponsors and the Company filed a Pre-Merger Notification and Report Forms with the Antitrust Division and the FTC and requested early termination of the initial 30-day waiting period. On May 18, 2011, the FTC granted the request for early termination of the waiting period under the HSR Act in connection with the Merger.

 

Notwithstanding the early termination of the waiting period, at any time before or after the consummation of the Merger, the Antitrust Division or the FTC could take such action under the antitrust laws as it deems necessary or desirable in the public interest, including seeking to enjoin the consummation of the Merger or seeking a divestiture of a substantial portion of the Company’s assets or seeking other conduct relief. At any time before or after the consummation of the Merger, any state or private party could seek to enjoin the consummation of the Merger or seek other structural or conduct relief.

In addition, subject to the terms and conditions set forth in the Merger Agreement, the Company, Parent and Merger Sub have agreed to cooperate with each other and to use their reasonable best efforts to obtain clearance under the antitrust and competition laws of Germany and Brazil. On May 13, 2011, the Company and an affiliate of the Sponsors made the requisite filings with the Bundeskartellamt under the Gesetzgegen Wettbewerbsbeschränkungen and on May 17, 2011, the Company and an affiliate of the Sponsors made the requisite filings with the Conselho Administrativo de Defese Economica under Law #8.884 of June 11 1994.

 

Generally, the Merger will be taxable to our shareholders who are U.S. holders for U.S. federal income tax purposes. A U.S. holder of our Common Stock receiving cash pursuant to the Merger generally will recognize capital gain or loss for U.S. federal income tax purposes in an amount equal to the positive difference, if any, between the amount of cash received and the holder’s adjusted tax basis in our Common Stock surrendered. You should consult your own tax advisor for a full understanding of how the Merger will affect your particular tax circumstances.

 

You should be aware that certain of our directors and executive officers may have interests in the Merger that may be different from, or in addition to, your interests as a shareholder and that may present actual or potential conflicts of interest. These interests include the following:

 

 

The Special Committee and our Board of Directors were aware of these interests and considered that these interests may be different from, or in addition to, the interests of our shareholders generally, among other

matters, in making their respective determinations regarding the Merger Agreement. The interests of the Company’s directors and officers are described more fully under “Special Factors — Interests of the Company’s Directors and Officers in the Merger” beginning on page [ • ].

 

As soon as reasonably practicable after the effective time of the Merger (and in any event within three business days following the effective time of the Merger), a paying agent will mail a letter of transmittal and instructions to all Company shareholders of record as of the effective time of the Merger. The letter of transmittal and instructions will tell you how to surrender your share certificates, if any, in exchange for the Merger Consideration. You should not forward any share certificates to the paying agent without a letter of transmittal.

 

Our Common Stock is listed on The NASDAQ Global Select Market under the trading symbol “SMOD”. The closing sale price of our Common Stock on April 25, 2011, which was the last trading day before the Company announced that it had entered into the Merger Agreement, was $8.18 per share.

 

Holders of our Common Stock may elect to pursue their appraisal and dissention rights in lieu of the Merger Consideration. The “fair value” of their shares, determined under Section 238 of the Companies Law, could be more than, the same as or less than the Merger Consideration. In order to qualify for these rights, you must provide written notice of objection prior to the vote to approve the Merger Proposal, provide written notice of your decision to dissent within 20 days of the date notice is given by the Company of the approval of the Merger Proposal and otherwise comply with the procedures of Section 238 of the Companies Laws. Failure to comply strictly with the procedures of Section 238 will result in the loss of appraisal and dissention rights. A copy of Section 238 is attached as Annex C to this proxy statement. A summary of the procedures may be found under “Appraisal Rights” beginning on page [ • ].

 

In connection with the announcement of the Merger Agreement, four shareholders have individually filed putative class action lawsuits in the Superior Court of California, Alameda County. Each of these actions generally assert that the members of our Board of Directors breached their fiduciary duties by causing the Company to enter into the Merger Agreement and further assert that the Company, the U.S. Sponsors, certain affiliates of the U.S. Sponsors, Parent and/or Merger Sub aided and abetted those alleged breaches of duty. These actions seek, inter alia , declaratory and injunctive relief, damages, and attorneys’ fees.

 

Additional Information (page [ • ])

 

You can find more information about the Company in the periodic reports and other information we file with the Securities and Exchange Commission (the “SEC”). The information is available at the SEC’s public reference facilities and at the website maintained by the SEC at www.sec.gov. For a more detailed description of the additional information available, please see the section entitled “Where Shareholders Can Find More Information” beginning on page [ • ].

 

Accounting Treatment (page [ • ])

 

The Merger is intended to be accounted for under the purchase method of accounting. See “Special Factors — Accounting Treatment” beginning on page [ • ].

 

The following questions and answers are intended to briefly address some commonly asked questions regarding the Merger Agreement, the Merger and the extraordinary general meeting. These questions and answers may not address all questions that may be important to you as a shareholder. Please refer to the “Summary Term Sheet” beginning on page [ • ] and the more detailed information contained elsewhere in this proxy statement, the annexes to this proxy statement and the documents referred to or incorporated by reference in this proxy statement, each of which you should read carefully. You may obtain information incorporated by reference in this proxy statement without charge by following the instructions under “Where Shareholders Can Find Additional Information” beginning on page [ • ].

 

 

 

This proxy statement, and the documents to which we refer you in this proxy statement, contain forward-looking statements that involve numerous risks and uncertainties. The statements contained in this communication that are not purely historical are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Exchange Act of 1934, as amended (the “Exchange Act”), including, without limitation, statements regarding projections of total revenue, EBITDA, EBIT and capital expenditures or other financial items, the expected benefits and timing of the closing of the proposed Merger, the management of the Company and the Company’s expectations, beliefs and intentions, strategies, objectives, plans and intentions, anticipated financial performance, business prospects, critical accounting policies, technological developments, new services, consolidation activities, research and development activities, future challenges and opportunities, regulatory, market and industry trends and similar matters. All forward-looking statements included in this document are based on information available to the Company on the date hereof. In some cases, you can identify forward-looking statements by terminology such as “may,” “can,” “will,” “should,” “could,” “expects,” “plans,” “anticipates,” “intends,” “believes,” “estimates,” “predicts,” “potential,” “targets,” “goals,” “projects,” “outlook,” “continue,” “preliminary,” “guidance,” or variations of such words, similar expressions, or the negative of these terms or other comparable terminology. These statements are not guarantees of the underlying expected actions or our future performance and may involve risks and uncertainties that could cause our actual growth, results of operations, performance and prospects to materially differ from those expressed in, or implied by, these statements. In addition to other factors and matters contained or incorporated in this document, these statements are subject to risks, uncertainties, and other factors, including, among others:

 

 

and other risks detailed in our current filings with the SEC, including our most recent filings on Forms 10-Q and 10-K. See “ Where Shareholders Can Find More Information ” beginning on page [ • ]. Many of the factors that will determine our future results are beyond our ability to control or predict. We cannot guarantee any future results, levels of activity, performance or achievements. In light of the significant uncertainties inherent in the forward-looking statements, readers should not place undue reliance on forward-looking statements, which speak only as of the date on which the statements were made and it should not be assumed that the statements remain accurate as of any future date. Moreover, we assume no obligation to update forward-looking statements or update the reasons that actual results could differ materially from those anticipated in forward-looking statements, except as required by law.

 

This discussion of the Merger is qualified in its entirety by reference to the Merger Agreement, which is attached to this proxy statement as Annex A . You should read the entire Merger Agreement carefully as it is the legal document that governs the Merger.

 

SMART

 

SMART Modular Technologies (WWH), Inc.

39870 Eureka Drive

Newark, California 94560

Phone: (510) 623-1231

 

We are a Cayman Islands exempted company and a leading independent designer, manufacturer and supplier of electronic subsystems to original equipment manufacturers, or OEMs. The Company offers more than 500 standard and custom products to OEMs engaged in the computer, enterprise, industrial, networking, gaming, telecommunications, defense, aerospace and embedded application markets. Taking innovations from the design stage through manufacturing and delivery, the Company has developed a comprehensive memory product line that includes DRAM, SRAM, and Flash memory in various form factors. The Company also offers high performance, high capacity solid state drives, or SSDs, for enterprise, defense, aerospace, industrial automation, medical, and transportation markets. The Company’s presence in the U.S., Europe, Asia, and Latin America enables it to provide its customers with proven expertise in international logistics, asset management, and supply-chain management worldwide.

 

We maintain a website at http://www.smartm.com. Our website address is provided as an inactive textual reference only. The information on our website is not incorporated into, and does not form a part of, this proxy statement. Detailed descriptions about the Company’s business and financial results are contained in our Annual Report on Form 10-K and our other reports filed pursuant to the Exchange Act, which are incorporated in this proxy statement by reference. See “ Where Shareholders Can Find Additional Information ” beginning on page [ • ].

 

Parent and Merger Sub

 

Saleen Holdings, Inc. and Saleen Acquisition, Inc.

c/o Silver Lake Partners

c/o Silver Lake Sumeru

2775 Sand Hill Road, Suite 100

Menlo Park, California 94025

Phone: (650) 233-8120

 

Saleen Holdings, Inc. is a newly formed Cayman Islands exempted company. Parent has not carried on any activities to date, except for activities incidental to its formation, in connection with financing the Merger Consideration, and as otherwise contemplated by the Merger Agreement. Parent is currently controlled by affiliates of the U.S. Sponsors. The Cayman Sponsors are expected to fund all or a portion of the equity financing of Parent at the closing of the Merger and, accordingly, the Cayman Sponsors will own all or a part of the share capital of Parent (other than share capital issued to the Rollover Investors and Mr. Shah (including his estate planning entities over which he has management and investment powers) in connection with the rollover financing). For more information see the section of this proxy statement titled “Special Factors — Certain Effects of the Merger” beginning on page [ • ].

 

Saleen Acquisition, Inc. is a newly formed Cayman Islands exempted company formed for the sole purpose of entering into the Merger Agreement and completing the transactions contemplated by the Merger Agreement and the related financing transactions. Merger Sub is a wholly owned subsidiary of Parent. Merger Sub has not conducted any business operations except for activities incidental to its formation, in connection

with financing the Merger Consideration, and as otherwise contemplated by the Merger Agreement. Upon consummation of the proposed Merger, Merger Sub will merge with and into the Company pursuant to the Plan of Merger, and Merger Sub will cease to exist and the Company will continue as the surviving company, under the name “SMART Modular Technologies (WWH), Inc.”

 

Set forth below for each director and executive officer of the Company is his or her respective present principal occupation or employment, the name of the corporation or other organization in which such occupation or employment is conducted and the five-year employment history of each such director or executive officer. None of the Company nor any of the Company’s directors or executive officers has, during the past five years, been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors). None of the Company nor any of the Company’s directors or executive officers listed below has, during the past five years, been a party to any judicial or administrative proceeding (except for matters that were dismissed without sanction or settlement) that resulted in a judgment, decree or final order enjoining the person from future violations of, or prohibiting activities subject to, federal or state securities laws, or a finding of any violation of federal or state securities laws. Each of the individuals listed below is a citizen of the United States (other than Mr. MacKenzie who is a citizen of the United Kingdom) and each of the individuals below, except Mr. Shah, have a principal place of business c/o SMART Modular Technologies (WWH), Inc., 39870 Eureka Drive, Newark, California 94560 and their telephone number is (510) 623-1231. Mr. Shah’s principal place of business is c/o Silver Lake Sumeru, 2775 Sand Hill Road, Suite 100, Menlo Park, California 94025 and his telephone number is (650) 233-8120.

 

Executive Officers

 

Iain MacKenzie.   Please see the information provided for Mr. MacKenzie in the section of this proxy statement titled “Special Factors — Business and Background of Certain Persons Related to the Company — Directors.”

 

Barry Zwarenstein.   Mr. Zwarenstein has served as our Senior Vice President and Chief Financial Officer since September 2008. Mr. Zwarenstein’s key areas of responsibilities include finance, tax, treasury, investor relations, internal audit and Sarbanes-Oxley compliance, business development, and risk management activities. Prior to joining SMART, Mr. Zwarenstein served as Executive Vice President — Finance and Chief Financial Officer of VeriFone Holdings, Inc., a provider of technology that enables electronic payment transactions, from July 2004 to August 2008. Mr. Zwarenstein also served as Vice President — Finance and Chief Financial Officer of Iomega Corporation, a computer storage company, from November 2001 to June 2004. Mr. Zwarenstein is a Director and the Chairman of the audit committee of DealerTrack, Inc. Mr. Zwarenstein received a Bachelor of Commerce degree from the University of Natal, South Africa and an M.B.A. from the Wharton School of Business at the University of Pennsylvania. He is qualified as a Chartered Accountant (South Africa).

 

Alan Marten.   Mr. Marten has served as Senior Vice President and General Manager of our Memory Business Unit since October 2007. Previously, he served as Vice President and General Manager of our Memory Business Unit from April 2004 and held an equivalent position at SMART when it was a division within Solectron Corporation, from 1999 through its divestiture. Mr. Marten is responsible for our product line management and business strategy, as well as oversight and management of engineering, our largest customers and the advance packaging group. Mr. Marten is also responsible for strategic planning and marketing efforts. Previously, Mr. Marten held the positions of SMART’s Vice President of Sales and Marketing from 1995 to 1997 and Director of Sales from 1990 to 1994. Prior to that, Mr. Marten was with Arrow Electronics where he served as Director of Product Management, Semiconductor and Memory Products from 1987 to 1989 and prior to that he began his career at AMD as a financial analyst and a product-marketing manager. Mr. Marten holds a B.S. in Economics from Santa Clara University.

 

Wayne Eisenberg.   Mr. Eisenberg has served as our Vice President of Worldwide Sales since April 2004 and previously held an equivalent position at SMART from 2002 when it was a division within Solectron

Corporation. Mr. Eisenberg is responsible for our global, strategic and general accounts. Between 1995 and 2002, Mr. Eisenberg held various positions with SMART, including Vice President of Sales, Director of North American and European Sales, Director of North American Sales, Director of Western Area OEM Sales, and Director of Channel Sales. Mr. Eisenberg has also held various positions at other high technology companies including Toshiba America CSD, GRiD Systems, Harris Corporation, Decision Data Computer Corporation and Monroe Systems. He holds a B.A. in Journalism with a minor in Business Administration from California State University at Chico.

 

John (Jack) Moyer.   Mr. Moyer has served as our Vice President of Human Resources since November 2007. Mr. Moyer is responsible for our worldwide human resources strategy, organizational development and planning, compensation, benefits, talent acquisition and employee relations. Prior to joining SMART, Mr. Moyer was an independent business consultant from 2006 and handled strategic human resources efforts for high technology companies, emphasizing in areas including merger and acquisition integration, a wide range of compensation matters, benefits, recruitment and organizational development. From 2002 to 2006, Mr. Moyer served as Vice President of Worldwide Human Resources for Chordiant Software, an enterprise software company. He has acquired broad corporate experience, which spans over 25 years and covers the software industry, corporate services, public relations, information services, and customer relations functions, derived from working with companies such as The Santa Cruz Operation, Inc. (SCO), Ore-Ida Foods, Inc., MasPar Computer Corporation, BusinessLand, Inc., and National Micronetics, Inc. Mr. Moyer also served on the board of Junior Achievement (Silicon Valley and Monterey Bay chapter) from 1987 to mid-2010. Mr. Moyer holds an M.B.A. and B.S. in Business Administration with an emphasis in Marketing from San Jose State University.

 

Directors

 

Iain MacKenzie.   Mr. MacKenzie has served as SMART’s President since February 2002, and he became a Director in April 2004 upon the divestiture from Solectron. In September 2005, he was named Chief Executive Officer. Previously, from August 1998 to 2002, Mr. MacKenzie served as Vice President of Worldwide Operations through the transition in November 1999 to the Technology Solutions Business unit of Solectron. Prior to that, he was responsible for the start up and growth of SMART Modular Technologies (Europe) Ltd., and he served as its general manager from 1997 to 1998. Before joining SMART, in 1997, Mr. MacKenzie held various management and leadership positions at other high technology corporations including Hughes Microelectronics, Ferrofluidics, Inc. (NH), Digital Equipment Corp. (semiconductor division) and Apricot Computers Ltd. (a Mitsubishi Company). Within the past five years, Mr. MacKenzie has not served on any public company boards other than SMART. Mr. MacKenzie holds the Higher National Diploma in mechanical and production engineering and the Ordinary National Diploma in electrical/electronics engineering, both from the Kirkcaldy College of Technology (Fife University) in Scotland.

 

Ajay Shah.   Mr. Shah has been a Director and the Chairman of the Board since April 2004. Mr. Shah is the founder and Managing Director of Silver Lake Sumeru, a role he has held since 2007. Mr. Shah is also the Managing Partner of Shah Capital Partners, a role he has held since 2003. In 1999 Mr. Shah helped found, and from 1999 to 2002, he served as the CEO of, the Technology Solutions Business unit of Solectron. Mr. Shah was a co-founder of SMART in 1988 and served as its Chairman and CEO until 1999 when it was acquired by Solectron and became part of Solectron’s Technology Business unit. Mr. Shah currently serves on the boards of Power-One, Inc., Spansion, Inc. and several privately held companies. Within the past five years, Mr. Shah has also served on the board of Flextronics International. Mr. Shah holds an M.S. in Engineering Management from Stanford University, and a B.S. in Engineering from the University of Baroda, India.

 

Kimberly E. Alexy.   Ms. Alexy has been a Director since September 2009. Ms. Alexy currently serves as the Principal of Alexy Capital Management, a private investment management firm that she founded in 2005. From 1998 to 2003, she served as Senior Vice President and Managing Director of Equity Research for Prudential Securities; from 1995 to 1998 she served as Vice President of Equity Research at Lehman Brothers, and from 1993 to 1995 she was Assistant Vice President of Corporate Finance at Wachovia Bank. Ms. Alexy currently serves on the board and on the audit and compensation committees of CalAmp Corp., a wireless datacom products company. From 2009 until its sale in September 2010, Ms. Alexy served on the board, was a member and Chair of the compensation committee and a member of the audit committee of Southwest

Water, a water and waste-water utility services company. From 2005 until 2010, Ms. Alexy served on the board, was the Chair of the compensation committee, a member and interim Chair of the audit committee and a member of the nominating and corporate governance committee of Dot Hill Systems, a storage systems company. Ms. Alexy is a Chartered Financial Analyst (CFA) and holds an M.B.A. with a concentration in Finance and Accounting from the College of William and Mary and a B.A. from Emory University. Within the past five years, Ms. Alexy has also served on the board of Maxtor Corporation prior to its acquisition by Seagate Technology.

 

Dennis McKenna.   Mr. McKenna has been a Director since January 2009. From 2008 to 2010, Mr. McKenna served as Chairman of the Board of Directors and, from 2009 to 2010 he served as interim CEO and President of Skycross, Inc., a privately held company providing global wireless RF solutions for the mobile phone, entertainment and computing industries. From 2006 to 2007, Mr. McKenna served as Chairman, CEO, and President of Silicon Graphics, a maker of high performance computing solutions, during its financial restructuring process. Mr. McKenna also served as interim CEO and President of SCP Global Technologies, a manufacturer of semiconductor equipment, during its sale process in 2005. In 1997, Mr. McKenna founded ChipPAC, a provider of semiconductor assembly and test services formerly listed on the The NASDAQ Global Select Market. He served as its Chairman, CEO and President until its sale in 2004 to form STATSChipPAC. Mr. McKenna currently serves on the Board of Directors and on the audit and compensation committees of Pericom Semiconductor, a worldwide supplier of high-speed serial connectivity integrated circuits and frequency control products. Within the past five years, Mr. McKenna has served on the Board of Directors of Legerity, Inc., a privately held fabless semiconductor company in the communications market, until its sale to Zarlink. Mr. McKenna holds a B.S. in Business Administration from Wayne State University in Detroit, Michigan.

 

Harry W. (Webb) McKinney.   Mr. McKinney has been a Director since April 2007. Mr. McKinney currently serves as an independent management consultant to a variety of companies. Previously, Mr. McKinney served as Executive Vice President in charge of merger integration, global citizenship efforts, organizational effectiveness and governance initiatives at Hewlett-Packard (“HP”) until his retirement in 2003. Other positions he held at HP during his 34-year tenure include President of Business Customer Organization, responsible for worldwide sales, marketing, manufacturing, and delivery of products for HP’s business customers; Vice President and General Manager of the PC business, responsible for the development, manufacturing and marketing of commercial desktop, mobile computing and server businesses worldwide; General Manager of the Home Products Division, leading HP’s initial entry into the consumer market for home computing products; and General Manager of the PC Software Division. Mr. McKinney currently serves on the boards of three non-profit organizations, aLearn, Civic Ventures and The American Leadership Forum of Silicon Valley (ALF). Within the past five years, Mr. McKinney has not served on any public company boards other than SMART. Mr. McKinney holds a B.S. and M.S. in Electrical Engineering from the University of Southern California.

 

Mukesh Patel.   Mr. Patel has been a Director since April 2004. Mr. Patel is the founder and Managing Director of Invati Capital LLC, a role he has held since 2008. Previously, Mr. Patel served as President and Chief Executive Officer of Metta Technology, which he co-founded in 2004, until its acquisition by LSI Logic Corporation in 2006. From 1999 to 2001 he served as Chief Executive Officer of Sparkolor Corporation, which was acquired by Intel Corporation in 2002. Mr. Patel was a co-founder of SMART in 1988, which was acquired by Solectron in 1999. Mr. Patel served as SMART’s Vice President and General Manager, Memory Product Division, from 1995 to 1999 and as Vice President of Engineering from 1989 to 1995. Prior to SMART, Mr. Patel was employed in the semiconductor industry at Seeq Technology, Advanced Micro Devices and Samsung Semiconductor. Mr. Patel currently serves on the board of AEHR Test Systems and is a member of their audit committee and multiple privately held companies. Within the past five years, Mr. Patel has not served on any other public company boards. He holds a B.S. in Electrical Engineering from Bombay University, India.

 

Clifton Thomas Weatherford.   Mr. Weatherford has been a Director since March 2005. Mr. Weatherford served as Executive Vice President and Chief Finance Officer of Business Objects, a provider of business intelligence software, from September 1997 until his retirement in January 2003. With over 39 years of experience in global technology companies in the United States, Europe and Japan, Mr. Weatherford has held

senior financial positions at NETCOM On-Line Communication Services from January 1996 to August 1997, Logitech from February 1994 to December 1995, Ungermann-Bass, Inc., a wholly owned subsidiary of Tandem Computers, from July 1990 to January 1994, Applied Materials from May 1989 to March 1990, Schlumberger from February 1982 to April 1989 and Texas Instruments from April 1971 to January 1982. Mr. Weatherford currently serves on the board and is the chair of the audit committee of each of Mellanox Technologies, Tesco Corporation and Spansion, Inc. and has served as a member of the SEC Federal Advisory Committee on Accounting Standards. Within the past five years, Mr. Weatherford has also served on the boards of Advanced Analogic Technologies, InfoGroup, Synplicity, Saba Software and ILOG S.A. Mr. Weatherford holds a B.B.A. from the University of Houston.

 

Parent

 

Parent is a newly formed Cayman Islands exempted company formed by the U.S. Sponsors in connection with the transactions contemplated by the Merger Agreement. The Cayman Sponsors are expected to fund all or a portion of the equity financing of Parent at the closing of the Merger and, accordingly, the Cayman Sponsors will own all or a part of the share capital of Parent (other than share capital issued to the Rollover Investors and Mr. Shah (including his estate planning entities over which he has management and investment powers) in connection with the rollover financing).

 

The principal business address and telephone number for Parent is c/o Silver Lake, 2775 Sand Hill Road, Suite 100, Menlo Park, California 94025, telephone number (650) 233-8120.

 

Set forth below for each of the directors and executive officers of Parent is his or her respective present principal occupation or employment, the name and principal business of the corporation or other organization in which such occupation or employment is conducted and the five-year employment history of such director and executive officer. Each person identified below is a citizen of the United States of America.

 

Kenneth Hao  — Director and President of Parent.  Mr. Hao is a Managing Director of Silver Lake Partners. Mr. Hao joined Silver Lake Partners in 2000. Mr. Hao’s principal business address is c/o Silver Lake Partners, 33/F Two IFC, 8 Finance Street, Central, Hong Kong.

 

Kyle Ryland  — Director and Vice President of Parent.  Mr. Ryland is a Managing Director of Silver Lake Sumeru. Mr. Ryland joined Silver Lake Sumeru in 2007. Previously, Mr. Ryland was a Managing Director of Shah Capital Partners. The address of Shah Capital Partners is 4800 Great America Parkway, Suite 400, Santa Clara, CA 95054. Mr. Ryland began working at Shah Capital Partners in 2005. Mr. Ryland’s principal business address is c/o Silver Lake Sumeru, 2775 Sand Hill Road, Suite 100, Menlo Park, California 94025.

 

Karen M. King — Director, Treasurer and Secretary of Parent. Ms. King is a Managing Director and Chief Legal Officer of Silver Lake. Ms. King joined Silver Lake in 2004. Ms. King’s principal business address is c/o Silver Lake, 2775 Sand Hill Road, Suite 100, Menlo Park, California 94025.

 

Merger Sub

 

Merger Sub is a newly formed Cayman Islands exempted company formed by Parent in connection with the transactions contemplated by the Merger Agreement.

 

The principal business address and telephone number for Merger Sub is c/o Silver Lake, 2775 Sand Hill Road, Suite 100, Menlo Park, California 94025, telephone number (650) 233-8120.

 

Set forth below for each of the directors and executive officers of Merger Sub is his or her respective present principal occupation or employment, the name and principal business of the corporation or other organization in which such occupation or employment is conducted and the five-year employment history of such director and executive officer. Each person identified below is a citizen of the United States of America.

 

Kenneth Hao  — Director and President of Merger Sub.  See information provided for Mr. Hao above.

Kyle Ryland  — Director and Vice President of Merger Sub. See information provided for Mr. Ryland above.

 

Karen M. King  — Director, Treasurer and Secretary of Merger Sub. See information provided for Ms. King above.

 

The SLP Filing Persons

 

The SLP U.S. Filing Persons

 

Silver Lake Partners III, L.P. is a private equity fund that was formed for the purpose of making investments in technology and technology-enabled industries. Silver Lake Technology Associates III, L.P., a Delaware limited partnership, is the general partner of Silver Lake Partners III, L.P.; SLTA III (GP), L.L.C., a Delaware limited liability company, is the general partner of Silver Lake Technology Associates III, L.P.; and Silver Lake Group, L.L.C., a Delaware limited liability company, is the managing member of SLTA III (GP), L.L.C. We refer to Silver Lake Partners III, L.P., Silver Lake Technology Associates III, L.P., SLTA III (GP), L.L.C., and Silver Lake Group, L.L.C., collectively, as the “SLP U.S. Filing Persons.”

 

The principal business address and telephone number for each of the SLP U.S. Filing Persons is c/o Silver Lake Partners, 2775 Sand Hill Road, Suite 100, Menlo Park, California 94025, telephone number (650) 233-8120.

 

Set forth below for each managing member of Silver Lake Group, L.L.C. is his respective present principal occupation or employment, the name and principal business of the corporation or other organization in which such occupation or employment is conducted and the five-year employment history of such person. Each person identified below is a citizen of the United States of America.

 

James A. Davidson  — Mr. Davidson is the Co-Chief Executive Officer of Silver Lake, which he co-founded in January 1999. Mr. Davidson’s principal business address is c/o Silver Lake, 2775 Sand Hill Road, Suite 100, Menlo Park, California 94025.

 

Glenn H. Hutchins  — Mr. Hutchins is the Co-Chief Executive Officer of Silver Lake, which he co-founded in January 1999. Mr. Hutchins’s principal business address is c/o Silver Lake, 9 West 57th Street, 32nd Floor, New York, NY 10019.

 

David J. Roux  — Mr. Roux is the Chairman of Silver Lake, which he co-founded in January 1999. Mr. Roux’s principal business address is c/o Silver Lake, 2775 Sand Hill Road, Suite 100, Menlo Park, California 94025.

 

The SLP Cayman Islands Filing Persons

 

Silver Lake Partners III Cayman (AIV III), L.P. is a private equity fund that was formed for the purpose of making investments in technology and technology-enabled industries. Silver Lake Technology Associates III Cayman, L.P., a Cayman Islands exempted limited partnership, is the general partner of Silver Lake Partners III Cayman (AIV III), L.P.; and Silver Lake (Offshore) AIV GP III, Ltd., a Cayman Islands exempted limited company, is the general partner of Silver Lake Technology Associates III Cayman, L.P. We refer to Silver Lake Partners III Cayman (AIV III), L.P., Silver Lake Technology Associates III Cayman, L.P., and Silver Lake (Offshore) AIV GP III, Ltd. as the “SLP Cayman Islands Filing Persons” and, together with the SLP U.S. Filing Persons, the “SLP Filing Persons.”

 

The principal business address and telephone number for each of the SLP Cayman Islands Filing Persons is c/o Silver Lake Partners, 2775 Sand Hill Road, Suite 100, Menlo Park, California 94025, telephone number (650) 233-8120.

 

Set forth below for each director of Silver Lake (Offshore) AIV GP III, Ltd. is his or her respective present principal occupation or employment, the name and principal business of the corporation or other organization in which such occupation or employment is conducted and the five-year employment history of such person. Each person identified below is a citizen of the United States of America.

Alan K. Austin  — Mr. Austin is a Managing Director of Silver Lake Partners. Mr. Austin joined Silver Lake Partners in 2003. Mr. Austin’s principal business address is c/o Silver Lake Partners, 2775 Sand Hill Road, Suite 100, Menlo Park, California 94025.

 

Michael J. Bingle  — Mr. Bingle is a Managing Director of Silver Lake Partners. Mr. Bingle joined Silver Lake Partners in 2000. Mr. Bingle’s principal business address is c/o Silver Lake Partners, 9 West 57th Street, 32nd Floor New York, NY 10019.

 

James A. Davidson  — See information provided for Mr. Davidson above.

 

Charles Giancarlo  — Mr. Giancarlo is a Managing Director of Silver Lake Partners. Mr. Giancarlo joined Silver Lake Partners in 2007. Prior to joining Silver Lake Partners, Mr. Giancarlo was employed by Cisco Systems from 1993-2007 where he most recently served as Executive Vice President and Chief Development Officer of Cisco and President of Cisco-Linksys. Cisco’s address is 170 West Tasman Drive, San Jose, California 95134-1706, and its principal business is to design, manufacture, and sell Internet Protocol-based networking and other products related to the communications and information technology industry and provide services associated with these products. Mr. Giancarlo’s principal business address is c/o Silver Lake Partners, 2775 Sand Hill Road, Suite 100, Menlo Park, California 94025.

 

Kenneth Hao  — See information provided for Mr. Hao above.

 

Glenn H. Hutchins  — See information provided for Mr. Hutchins above.

 

Yolande A. Jun  — Ms. Jun is Senior Vice President — Finance of Silver Lake. Ms. Jun joined Silver Lake in 2000. Ms. Jun’s principal business address is c/o Silver Lake, 10080 North Wolfe Road, Suite SW3-190, Cupertino, CA 95014.

 

Karen M. King  — See information provided for Ms. King above.

 

Gregory K. Mondre  — Mr. Mondre is a Managing Director of Silver Lake Partners. Mr. Mondre joined Silver Lake Partners in 1999. Mr. Mondre’s principal business address is c/o Silver Lake Partners, 9 West 57th Street, 32nd Floor New York, NY 10019.

 

David J. Roux  — See information provided for Mr. Roux above.

 

Andrew Wagner  — Mr. Wagner is the Chief Financial Officer and a Managing Director and Executive Vice President of Silver Lake. Mr. Wagner joined Silver Lake in 2008. Prior to joining Silver Lake, Mr. Wagner was employed by GSC Group as Senior Managing Director of Finance and Administration. Mr. Wagner began working at GSC in 2000. GSC’s address is 500 Campus Drive, Suite 220, Florham Park, NJ 07932, and its principal business is investment management of alternative assets. Mr. Wagner’s principal business address is c/o Silver Lake, 9 West 57th Street, 32nd Floor New York, NY 10019.

 

The SLS Filing Persons

 

The SLS U.S. Filing Persons

 

Silver Lake Sumeru Fund, L.P. is a private equity fund that was formed for the purpose of making investments in middle-market technology companies. Silver Lake Technology Associates Sumeru, L.P., a Delaware limited partnership, is the general partner of Silver Lake Sumeru Fund, L.P.; and SLTA Sumeru (GP), L.L.C., a Delaware limited liability company, is the general partner of Silver Lake Technology Associates Sumeru, L.P.; We refer to Silver Lake Sumeru Fund, L.P., Silver Lake Technology Associates Sumeru, L.P. and SLTA Sumeru (GP), L.L.C., collectively, as the “SLS U.S. Filing Persons.”

 

The principal business address and telephone number for each of the SLS U.S. Filing Persons is c/o Silver Lake Sumeru, 2775 Sand Hill Road, Suite 100, Menlo Park, California 94025, telephone number (650) 233-8120.

 

Set forth below for each member of the investment committee of SLTA Sumeru (GP), L.L.C. is his or her respective present principal occupation or employment, the name and principal business of the corporation or

other organization in which such occupation or employment is conducted and the five-year employment history of such person. Each person identified below is a citizen of the United States of America.

 

Ajay Shah  — See information provided for Mr. Shah under “Special Factors — Business and Background of Certain Persons Related to the Company — Directors” beginning on page [ • ].

 

Glenn H. Hutchins  — See information provided for Mr. Hutchins above.

 

David J. Roux  — See information provided for Mr. Roux above.

 

Kyle Ryland  — See information provided for Mr. Ryland above.

 

John Brennan  — Mr. Brennan is a Managing Director at Silver Lake Sumeru. Mr. Brennan joined Silver Lake Sumeru in 2008. Prior to joining Silver Lake Sumeru, Mr. Brennan was employed by Adobe Systems Incorporated where he most recently led the Platform Software business unit. Adobe’s address is 345 Park Avenue, San Jose, California and their principal business is to offer creative, business, web and mobile software and services. Mr. Brennan began working at Adobe in 2004. Mr. Brennan’s principal business address is c/o Silver Lake Sumeru, 2775 Sand Hill Road, Suite 100, Menlo Park, California 94025.

 

Paul Mercadante  — Mr. Mercadante is a Managing Director at Silver Lake Sumeru. Mr. Mercadante joined Silver Lake Sumeru in 2007. Prior to joining Silver Lake Sumeru, Mr. Mercadante was employed by Shah Capital Partners. The address of Shah Capital Partners is 4800 Great America Parkway, Suite 400, Santa Clara, CA 95054. Mr. Mercadante began working at Shah Capital in 2005. Mr. Mercadante’s principal business address is c/o Silver Lake Sumeru, 2775 Sand Hill Road, Suite 100, Menlo Park, California 94025.

 

Hollie Moore Haynes  — Ms. Haynes is a Managing Director at Silver Lake Sumeru. Ms. Haynes joined Silver Lake Partners in 1999 and began working for Silver Lake Sumeru in 2007. Ms. Haynes’ principal business address is c/o Silver Lake Sumeru, 2775 Sand Hill Road, Suite 100, Menlo Park, California 94025.

 

The SLS Cayman Islands Filing Persons

 

Silver Lake Sumeru Fund Cayman, L.P. is a private equity fund that was formed for the purpose of making investments in middle-market technology companies. Silver Lake Technology Associates Sumeru Cayman, L.P., a Cayman Islands exempted limited partnership, is the general partner of Silver Lake Sumeru Fund Cayman, L.P.; SLTA Sumeru (GP) Cayman, L.P., a Cayman Islands exempted limited partnership, is the general partner of Silver Lake Technology Associates Sumeru Cayman, L.P.; and Silver Lake Sumeru (Offshore) AIV GP, Ltd., a Cayman Islands exempted limited company, is the general partner of SLTA Sumeru (GP) Cayman, L.P. We refer to Silver Lake Sumeru Fund Cayman, L.P., Silver Lake Technology Associates Sumeru Cayman, L.P., SLTA Sumeru (GP) Cayman, L.P., and Silver Lake Sumeru (Offshore) AIV GP, Ltd., collectively, as the “SLS Cayman Islands Filing Persons” and together with the SLS U.S. Filing Persons, the “SLS Filing Persons.”

 

The principal business address and telephone number for each of the SLS Cayman Islands Filing Persons is c/o Silver Lake Sumeru, 2775 Sand Hill Road, Suite 100, Menlo Park, California 94025, telephone number (650) 233-8120.

 

Set forth below for each director of Silver Lake Sumeru (Offshore) AIV GP, Ltd. is his or her respective present principal occupation or employment, the name and principal business of the corporation or other organization in which such occupation or employment is conducted and the five-year employment history of such person. Each person identified below is a citizen of the United States of America.

 

Alan K. Austin  — See information provided for Mr. Austin above.

 

John Brennan  — See information provided for Mr. Brennan above.

 

James A. Davidson  — See information provided for Mr. Davidson above.

 

Hollie Moore Haynes  — See information provided for Ms. Haynes above.

 

Glenn H. Hutchins  — See information provided for Mr. Hutchins above.

Yolande A. Jun  — See information provided for Ms. Jun above.

 

Karen M. King  — See information provided for Ms. King above.

 

Paul Mercadante  — See information provided for Mr. Mercadante above.

 

David J. Roux  — See information provided for Mr. Roux above.

 

Kyle Ryland  — See information provided for Mr. Ryland above.

 

Ajay Shah  — See information provided for Mr. Shah under “Special Factors — Business and Background of Certain Persons Related to the Company — Directors” beginning on page [ • ].

 

During the last five years, none of Parent, Merger Sub, the SLP Filing Persons, the SLS Filing Persons, any of the officers or directors of Merger Sub, any of the managing members of Silver Lake Group, L.L.C. described above, any of the directors of Silver Lake (Offshore) AIV GP III, Ltd. described above, any of the members of the investment committee of SLTA Sumeru (GP), L.L.C. described above or any of the directors of Silver Lake Sumeru (Offshore) AIV GP, Ltd. described above have been (i) convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or (ii) a party to any judicial or administrative proceeding (except for matters that were dismissed without sanction or settlement) that resulted in a judgment or decree or final order enjoining the person from future violations of, or prohibiting activities subject to, federal or state securities laws, or a finding of any violation of federal or state securities laws.

 

The Company, Parent and Merger Sub entered into the Merger Agreement on April 26, 2011.

 

Under the terms of the Merger Agreement, Merger Sub will be merged with and into the Company pursuant to the Plan of Merger and the separate corporate existence of Merger Sub will thereupon cease, with the Company surviving the Merger as a wholly owned subsidiary of Parent. Parent and Merger Sub were formed by the U.S. Sponsors.

 

The following will occur in connection with the Merger:

 

 

Following and as a result of the Merger:

 

 

The board of directors of the surviving company will consist of the directors of Merger Sub immediately prior to the effective time until their successors have been duly elected or appointed and qualified or until their earlier death, resignation or removal. The officers of the surviving company will be the officers of the

Company immediately prior to the effective time of the Merger until their successors have been duly appointed and qualified or until their earlier death, resignation or removal.

 

Our business was originally founded in 1988 as SMART Modular Technologies, Inc. (“SMART Modular”). SMART Modular became a publicly traded company in 1995. Ajay Shah, our current Chairman of the Board of Directors, co-founded SMART Modular and served as Chairman and CEO of SMART Modular until 1999, when SMART Modular was acquired by Solectron Corporation (“Solectron”) and became a part of the Technology Solutions Business unit of Solectron. In April 2004, a group of investors, including Shah Capital Partners, of which Mr. Shah was a Managing Partner, acquired our business from Solectron, and we began to operate as an independent company under the name SMART Modular Technologies (WWH), Inc. under the laws of the Cayman Islands. In February 2006, the Company again became a publicly traded company.

 

Since going public in 2006, our Board of Directors and senior management periodically review our long-term strategic plan with the goal of maximizing shareholder value. As part of this ongoing process, our Board and senior management have periodically reviewed various strategic alternatives to enhance shareholder value that might be available to the Company, including possible acquisitions of other companies or business combinations with other companies.

 

On August 12, 2010, our Board of Directors held a special telephonic meeting to approve the fiscal year 2011 annual operating plan, and agreed that due to the cyclical nature of the Company’s business, it would be appropriate to institute a mid-year annual operating plan review, the first of which would be held in February 2011.

 

On August 25, 2010, our Chief Executive Officer, Mr. MacKenzie, had a lunch meeting initiated by the president and chief operating officer of an industry participant at which the two executives discussed possible partnership or business opportunities between the Company and such industry participant in Brazil and in the solid state drive (“SSD”) enterprise market generally.

 

On October 1, 2010, Messrs. MacKenzie and Shah spoke by telephone and discussed Mr. MacKenzie’s frustration at the stock market’s reaction to the Company’s September 30, 2010 earnings announcement. Mr. Shah and Mr. MacKenzie discussed the advantages and disadvantages of being a public company and Mr. Shah indicated that a take-private transaction might be worth exploring.

 

On the morning of October 7, 2010, Mr. MacKenzie attended a meeting at a private equity firm, which we refer to as Financial Buyer A, to discuss the Company’s business and Financial Buyer A’s views on the valuation of the Company’s business. No specific proposals resulted from this meeting, although Financial Buyer A invited Mr. MacKenzie to contact Financial Buyer A if the Board were considering a fundamental strategic transaction.

 

Later on October 7, 2010, Mr. Shah called Mr. MacKenzie and indicated his preliminary interest in having the U.S. Sponsors conduct a review of the Company to explore a possible take-private transaction with the Company. Mr. Shah did not indicate any possible price or specific terms.

 

On October 8, 2010, Mr. MacKenzie telephoned Ms. Kimberly Alexy, the Chair of the Nominating and Corporate Governance Committee, and advised her that Mr. Shah had indicated the U.S. Sponsors’ preliminary interest in conducting a review of the Company to explore a possible take private transaction with the Company. Mr. MacKenzie and Ms. Alexy discussed the process that the Company should follow to evaluate this preliminary indication of interest, including whether to form a special committee to consider any future proposal and agreed to call a meeting of the Board of Directors to discuss such matters.

 

On October 12, 2010, our Board held a special telephonic meeting. At the meeting, Mr. Shah advised the Board that he and the U.S. Sponsors were interested in a potential acquisition of the Company. After a brief discussion with Mr. Shah, Mr. Shah and Mr. MacKenzie left the meeting. The remaining five directors then discussed the formation of a special committee to consider any proposal by the U.S. Sponsors and any other

strategic alternatives. After discussion, our Board constituted a Special Committee, comprised of Ms. Alexy, Mr. Clifton T. Weatherford, Mr. Dennis McKenna and Mr. Harry W. McKinney, subject to later adoption of a charter. Mr. Mukesh Patel then left the Board meeting. Discussion ensued, including with respect to legal counsel for the Special Committee.

 

On October 13 and 14, 2010, Ms. Alexy had discussions with several law firms regarding their possible engagement by the Special Committee. On October 14, 2010, Ms. Alexy and Mr. MacKenzie discussed generally a process for considering any proposal the Company might receive, and also discussed the earlier conversations between Mr. MacKenzie and the industry participant and its possible interest in a transaction with the Company

 

On October 15, 2010, the members of the Special Committee discussed the retention of legal counsel and investment bankers, and also discussed a committee charter and Special Committee compensation.

 

On October 18, 2010, Ms. Alexy received a call from another private equity firm, which we refer to as Financial Buyer B. The representative of Financial Buyer B indicated that he had been referred by Mr. MacKenzie to her as Chair of the Nominating and Corporate Governance Committee and that he wanted to express Financial Buyer B’s possible interest in an acquisition of the Company. Also on October 18, 2010, Mr. MacKenzie advised Ms. Alexy that he had received a call that day expressing interest in the Company from Financial Buyer A.

 

On October 19, 2010, Ms. Alexy called Mr. Shah to inquire about the status of the U.S. Sponsors’ potential proposal, and Mr. Shah advised that he would like to conduct a limited due diligence review prior to submitting an initial proposal. Later that day, the Special Committee determined to engage DLA Piper LLP (US) (“DLA Piper”) as counsel for the Special Committee.

 

On October 21, 2010, our Board held a telephonic meeting to consider the scope of authority of the Special Committee and the adoption of a charter. Mr. Bruce Goldberg, Vice President, Chief Legal and Chief Compliance Officer of the Company, and a representative of DLA Piper were present. After discussion regarding these matters, the meeting was adjourned to permit further legal review and the finalization of a charter for the Special Committee.

 

On October 22, 2010, our Board reconvened the telephonic board meeting with Mr. Goldberg and a representative of DLA Piper present and approved the resolutions establishing the charter of our Special Committee. Our Special Committee was charged to review, evaluate, investigate and negotiate the terms and conditions of any potential transaction or alternatives thereto, including remaining as an independent entity, to make a recommendation to the Board as to whether any such transaction is fair to, advisable and in the best interests of our Company and our shareholders and to recommend to the Board if any action should be taken with respect to any potential transaction or alternatives thereto, including remaining as an independent entity. Our Board resolved not to recommend any potential transaction with an affiliate of the Company for approval by our shareholders unless such transaction received the prior favorable recommendation of our Special Committee. Our Special Committee was authorized to retain independent legal and financial advisors. Our Board established compensation for our Special Committee as $2,000 per meeting for the Chair and $1,000 per meeting for the remaining members. The Special Committee was to serve until the earlier of the consummation of a potential transaction or January 31, 2011, if a proposal from an affiliate of the Company was either not made or had been withdrawn by January 31, 2011.

 

Immediately thereafter, the Special Committee met to discuss process and next steps. DLA Piper was present at the meeting. The Special Committee appointed Ms. Alexy as Chair. DLA Piper provided legal advice concerning the Special Committee’s fiduciary duties. The Special Committee determined that the U.S. Sponsors would not be provided due diligence materials until the U.S. Sponsors provided a written proposal of sufficient interest to the Special Committee and only after negotiation of an appropriate nondisclosure agreement. The Special Committee discussed possible means by which to ascertain that any proposal made by the U.S. Sponsors reflected the best value reasonably attainable under the circumstances. The Special Committee discussed the possible engagement of financial advisors and determined to interview three investment banks with knowledge in the industry. The Special Committee acknowledged that as Chairman of the Board, Mr. Shah regularly conducted meetings with management with respect to the ongoing

business of the Company and that Mr. Shah had fiduciary duties to remain informed about the Company’s business. However, the Special Committee also recognized that due to Mr. Shah’s relationship with the U.S. Sponsors, Mr. Shah was presented with a possible conflict and that it would be appropriate for Mr. Shah, during the course of the U.S. Sponsors’ consideration of a transaction with the Company, to restrict his prior access to certain information about the Company and its business, whether in writing or based upon communications with management. Therefore, the Special Committee determined, and Mr. Shah agreed, that he would cease to have routine access to management and material non-public information about the Company, other than with respect to information provided to the full Board.

 

On October 26, 2010, the Special Committee held a meeting at the offices of DLA Piper. Representatives of DLA Piper were present. The Special Committee interviewed three investment banks to serve as the Special Committee’s financial advisor. No final decision was made regarding the engagement of a financial advisor. At this meeting, the Special Committee also discussed preliminary information concerning the current quarter. The Special Committee also discussed the recent inbound calls from Financial Buyer A and Financial Buyer B to Mr. MacKenzie expressing interest in an acquisition and the earlier conversations between Mr. MacKenzie and the industry participant and its possible interest in the Company.

 

On November 2, 2010, our Audit Committee met and discussed preliminary information regarding the current quarter, including the possible adverse impact of the DRAM pricing cycle on the quarter’s revenues and profits. Following the meeting, preliminary information regarding the current quarter, including the possible adverse impact on the quarter’s revenues and profits of the DRAM pricing cycle, was sent to the full Board. As Chairman of the Board, Mr. Shah received the preliminary information and called Ms. Alexy on November 4, 2010 to discuss the need for the Company, in light of this preliminary information, to focus on a strategy for mitigating the adverse impact of the DRAM pricing cycle on the Company’s revenues and profits. Mr. Shah and Ms. Alexy recognized that Mr. Shah’s participation would be valuable to that process, but also understood that under the restrictions that had been placed on Mr. Shah’s access to information, Mr. Shah would not be able to participate fully in this effort. Mr. Shah indicated that he believed that the U.S. Sponsors would be willing to postpone any proposal to acquire the Company until after such time as the Company had put a plan in place to mitigate the effects on future Company financial performance of the DRAM pricing cycle and any information regarding the negative impact on the quarter had been made public, so that Mr. Shah could participate in his role as Chairman of the Board in the Company’s efforts with respect to this issue.

 

On November 6, 2010, the Special Committee held a telephonic meeting. A representative of DLA Piper was present. The Special Committee was apprised of Mr. Shah’s discussion with Ms. Alexy. The Special Committee discussed the upcoming board meeting and the proposal discussed between Mr. Shah and Ms. Alexy, but did not make any changes to the restrictions placed on Mr. Shah at that time.

 

On November 10, 2010, Mr. Shah and Ms. Alexy again discussed Mr. Shah’s potential participation in the December 10, 2010 Board meeting in light of the fact that the U.S. Sponsors were considering a possible acquisition proposal.

 

On November 15, 2010, the Special Committee held a telephonic meeting. A DLA Piper representative was present. The Special Committee further discussed the process regarding the upcoming Board meeting. Subsequent to this meeting, a representative of Simpson Thacher & Bartlett LLP (“Simpson Thacher”), counsel to the U.S. Sponsors, confirmed to the Special Committee’s counsel the U.S. Sponsors’ willingness to postpone any proposal to acquire the Company until after the conclusion of the Board’s consideration of the impact of the DRAM pricing cycle on the current quarter, the determination of any remediation efforts to be undertaken by the Company, and the public announcement of such matters, if any, so that Mr. Shah could participate in his role as Chairman of the Board in the Company’s efforts with respect to these issues.

 

On November 17, 2010, the Special Committee held a telephonic meeting. A DLA Piper representative was present. The Special Committee discussed the agenda for the upcoming Board meeting on December 10. The Special Committee again considered the issue regarding Mr. Shah’s participation in that meeting, and the U.S. Sponsors’ willingness to postpone the making of an acquisition proposal. The Special Committee recognized that as Chairman of the Board and founder of the Company, and given his deep experience in the Company’s industry, Mr. Shah’s input would be valuable to the consideration of any current impact on the

Company’s business. The Special Committee also continued to recognize that due to Mr. Shah’s relationship with the U.S. Sponsors, it continued to be appropriate to restrict Mr. Shah’s access to certain information. Accordingly, the Special Committee concluded that it would invite Mr. Shah to participate in the December 10 Board meeting, but would otherwise leave the restrictions on Mr. Shah in place. The Special Committee also determined to request a report from management to the Board on industry trends and their expected impacts on the Company’s annual operating plan, as well as management actions planned in response to such trends.

 

On December 10, 2010, our Board held a regular meeting at our headquarters. As determined by the Special Committee and agreed by Mr. Shah, Mr. Shah participated in such meeting. Management presented updates on the various business units, operating trends and an outlook for the first and second quarters of fiscal 2011. The Board asked questions and discussed these presentations and the process for a review of the second six months of the fiscal 2011 annual operating plan, due in February 2011. The Board noted the need for a revised operating plan in light of the impact from the current DRAM pricing cycle and other industry trends.

 

Following the December 10, 2010, Board meeting, our Special Committee held a meeting at our headquarters. A representative of DLA Piper was present at the meeting. The Special Committee discussed the materials presented at the Board meeting and determined that if a process to sell the Company were to commence, the Board materials would be provided at the appropriate time to credible third party bidders. The Special Committee also discussed the upcoming management presentation on a revised 2011 annual operating plan scheduled for February 2011, and the need for a revised plan to provide a basis for a revised valuation analysis.

 

During the week of December 20, 2010, Mr. Shah called Ms. Alexy and reconfirmed that the U.S. Sponsors remained interested in an acquisition of the Company, but would defer making a decision until January 2011.

 

On January 3, 2011, Mr. Shah called Ms. Alexy and reconfirmed that the U.S. Sponsors intended to make a proposal. Mr. Shah and Ms. Alexy discussed the possible processes that the Special Committee might follow to evaluate any proposal by the U.S. Sponsors and explore other possible proposals.

 

On January 4, 2011, Financial Buyer A called Mr. MacKenzie to express continuing interest in the Company. On the morning of January 5, 2011, Financial Buyer B called Ms. Alexy to express continuing interest in the Company.

 

On January 5, 2011, our Special Committee held a telephonic meeting. A DLA Piper representative attended this meeting. The Special Committee discussed Mr. Shah’s discussions with Ms. Alexy. The Special Committee confirmed that due diligence information would only be provided if the U.S. Sponsors provided a written proposal at a price that the Special Committee found attractive enough to consider. Ms. Alexy reported on the January 4, 2011 inbound call from Financial Buyer A to Mr. MacKenzie and the January 5, 2011 inbound call from Financial Buyer B to Ms. Alexy, noting that each had expressed continuing interest in a transaction involving the Company. The Special Committee discussed possible means by which to ascertain that any proposal made by the U.S. Sponsors reflected the best value reasonably attainable under the circumstances. The Special Committee also discussed possible retention of financial advisors, and reviewed the credentials and capabilities of the three investment banks which had interviewed with the Special Committee on October 26, 2010. The Special Committee determined that Barclays was the preferred financial advisor of the three and directed the Chair to request that Barclays update their preliminary valuation presentation based on management’s current annual operating plan for fiscal 2011 and present their findings to the Special Committee. The Special Committee also determined to confirm with the Board that the Special Committee would continue to function in light of Mr. Shah’s indication of the U.S. Sponsors’ continuing intention to present an acquisition proposal.

 

On January 7, 2011, Ms. Alexy telephoned Mr. Shah and advised him that the Special Committee required a written proposal from the U.S. Sponsors prior to permitting any due diligence.

 

On January 10, 2011, Barclays met with our management to review the Company’s interim revised operating plan.

 

On January 11, 2011, the Special Committee held a telephonic meeting. A DLA Piper representative attended the meeting. The Special Committee discussed our prospects and growth strategy. The Special

Committee concluded that it was not necessary to sell the Company at this time. The Special Committee discussed a process to consider any proposal received from the U.S. Sponsors and to explore interest by other potential buyers on a confidential basis upon receipt of a formal proposal from the U.S. Sponsors. Ms. Alexy reported that Barclays was updating its earlier preliminary valuation presentation based on the current annual operating plan.

 

On January 13, 2011, Mr. Shah called Ms. Alexy to advise her that the U.S. Sponsors were submitting a nonbinding written proposal to acquire the Company. Later that day, the U.S. Sponsors delivered a nonbinding written proposal to acquire our Company for $7.50 per share in cash. The nonbinding written proposal indicated that it would remain open through February 1, 2011.

 

On January 16, 2011, Barclays provided the Special Committee with an updated preliminary valuation analysis. On the morning of January 17, 2011, Ms. Alexy provided Barclays with the U.S. Sponsors’ proposal.

 

On January 17, 2011, the Special Committee held a telephonic meeting. A representative of DLA Piper was present. Representatives of Barclays also attended the meeting. Barclays presented its preliminary valuation analysis to the Special Committee, which had been prepared based on management’s current business model. Barclays noted that the management had recently commenced work to update its model in light of changing industry trends, and that further revisions to the preliminary valuation analysis were in process. The Special Committee discussed the preliminary valuation analysis with Barclays and discussion ensued. Counsel provided a review of the U.S. Sponsors’ proposal and briefed the Special Committee on its fiduciary duties. Barclays provided its views with respect to U.S. Sponsors’ proposal, reviewed possible financing alternatives that might be available to the U.S. Sponsors and their experience with the U.S. Sponsors as buyers. Barclays then left the meeting. The Special Committee then discussed various alternatives available to the Company, including the risks and benefits associated with the current draft of management’s revised operating plan, upside scenarios for the business in fiscal 2011, 2012 and beyond, expected contributions from the startup Brazil flash production operations (“Brazil Flash”) and SSD products in 2012 and beyond and the impact of the DRAM pricing cycle to our trading price in the near term. The Special Committee concluded that the U.S. Sponsors’ proposal appeared to undervalue the Company particularly given the longer term value drivers from the Brazil and SSD product lines and was not sufficiently attractive to warrant further discussion or action. The Special Committee requested that Ms. Alexy communicate this conclusion to Mr. Shah. The Special Committee also noted that the revised operating plan required Board input and requested a Strategy Committee review of the revised plan as soon as possible. The Special Committee authorized Ms. Alexy to advise Mr. MacKenzie of the U.S. Sponsors’ proposal price and the Special Committee’s decision to reject the proposal.

 

On January 18, 2011, Ms. Alexy communicated the decision by the Special Committee not to pursue the U.S. Sponsors’ proposal to Mr. Shah, and indicated the Special Committee’s belief that Company’s prospects supported a higher valuation. Ms. Alexy also advised Mr. MacKenzie and Barry Zwarenstein, our Chief Financial Officer, of the U.S. Sponsors’ proposal and the Special Committee’s decision to reject the proposal.

 

Later on January 18, 2011, the Special Committee held a telephonic meeting. A representative of DLA Piper was present at the meeting. Ms. Alexy confirmed that she had conveyed the Special Committee’s rejection of the U.S. Sponsors’ proposal to Mr. Shah. The Special Committee noted that the Board had not yet reviewed the revised operating plan, and recognized the need for a Board-approved operating plan for the second half of 2011 prior to any valuation discussions. The Special Committee requested that Ms. Alexy reiterate to the U.S. Sponsors the Committee’s position that it did not wish to pursue the U.S. Sponsors’ proposal, but to further inform the U.S. Sponsors that Ms. Alexy would make herself available to them in order to consider any further information that the U.S. Sponsors might want to share with her.

 

On January 19, 2011, in an email to Ms. Alexy, Mr. Shah indicated that the U.S. Sponsors had prepared materials regarding valuation trends based on publicly available information that Mr. Shah would like to review with Ms. Alexy and share with the Special Committee and its financial advisors, if any. Later on January 19, 2011, Mr. Shah sent Ms. Alexy these valuation materials for her review, and Ms. Alexy subsequently distributed the valuation materials to each member of the Special Committee.

On January 20, 2011, Ms. Alexy and Mr. Shah spoke by telephone and Mr. Shah reviewed the valuation materials he had provided her. Mr. Shah then called each member of the Special Committee to discuss the valuation materials and the $7.50 proposal from the U.S. Sponsors.

 

On February 1, 2011, Ms. Alexy telephoned Mr. Shah to discuss his participation in the upcoming February 16, 2011 Board meeting, in light of the pending acquisition proposal. Mr. Shah confirmed that the U.S. Sponsors’ proposal was not being withdrawn despite the February 1, 2011 expiration date. Ms. Alexy and Mr. Shah discussed Mr. Shah’s attendance at the meeting. They agreed that Mr. Shah would attend the meeting to provide his views on the Company’s strategy, including the Company’s positioning with respect to its different product lines, and valuation and then leave the meeting. Mr. Shah also indicated that he had no objection to a resolution to extend the term of the Special Committee.

 

On February 12, 2011, Mr. MacKenzie sent the materials for the February 16, 2011 Board meeting, including management’s revised second half fiscal 2011 operating plan, to all directors, including Mr. Shah.

 

On February 16, 2011, our Board of Directors held a meeting at our Company headquarters scheduled at the request of the Strategy Committee to consider the revised fiscal 2011 second half annual operating plan. Prior to the formal commencement of the meeting, Mr. Shah presented a review of the Company’s strategy, including the Company’s positioning with respect to its product lines, and the U.S. Sponsors’ valuation framework supporting their proposed $7.50 acquisition proposal. Mr. Shah then left the meeting. Our Board approved a revision to the charter of the Special Committee to confirm that the Special Committee would remain in existence until the consummation of a transaction or the Board’s action dissolving the Special Committee, and agreed to evaluate the Special Committee’s continued existence on a quarterly basis. Our Board then reviewed the Company’s performance for the first half of fiscal 2011 compared to the original annual operating plan, and reviewed management’s revised second half of fiscal 2011 operating plan. The second half plan was approved. Management provided updates on the memory business unit, Brazil, the SSD product line and an update on the outlook for the current quarter and the next fiscal quarter. Our Board discussed financing alternatives for the business and the possible sale of convertible notes.

 

Immediately following the Board meeting on February 16, 2011, our Special Committee held a meeting at our headquarters. A DLA Piper representative was present. The Special Committee discussed Mr. Shah’s presentation to our Board. The Special Committee determined that the $7.50 per share proposal from the U.S. Sponsors was still insufficient to pursue and authorized Ms. Alexy to communicate such decision to the U.S. Sponsors. The Special Committee reviewed the revised fiscal 2011 second half annual operating plan and the management plan for fiscal years 2012 and 2013 (as later updated, the “board case” projections), and expressed concerns about assumptions, including those relating to DRAM pricing, competition in the Brazil DRAM market, and the SSD revenue ramp and margin. The Special Committee determined that the plan should be revised to reflect revised assumptions on these matters based on management’s further review. The Special Committee recognized that this revised case would be the case delivered to the U.S. Sponsors and any other potential bidders for purposes of developing proposals to acquire the Company. The Special Committee requested that Ms. Alexy and Mr. McKenna, who chaired the Strategy Committee, convey the Special Committee’s feedback on the revised plan to management. The Special Committee discussed the proposed terms of Barclays’ engagement and approved the engagement of Barclays subject to final revisions in the terms of the engagement. The DLA Piper representative then advised that she was leaving DLA Piper and joining Kaye Scholer LLP (“Kaye Scholer”). After the DLA Piper representative departed, the Special Committee discussed the proposed change in law firm representation and authorized the engagement of Kaye Scholer as replacement Special Committee counsel, subject to the Chair’s confirmation of equivalent support.

 

On February 23, 2011, Barclays was engaged as independent financial advisor to the Committee. Also on February 23, 2011, Ms. Alexy and Mr. Shah discussed his request to initiate a due diligence process and Ms. Alexy informed Mr. Shah that Barclays was engaged as the Special Committee’s independent financial advisor. Ms. Alexy also had a telephone call with Messrs. MacKenzie and Zwarenstein to discuss revised assumptions regarding the second half of fiscal 2011 and fiscal years 2012 and 2013 based on input from the Special Committee. Following this discussion, management prepared a revised plan for the remainder of fiscal 2011 and fiscal years 2012 and 2013 (as later updated, the “reviewed case” projections) and shared it with Barclays.

On February 28, 2011, the Special Committee held a telephonic meeting. Kaye Scholer and Barclays representatives were present at the meeting. Messrs. MacKenzie, Zwarenstein and Goldberg were also present at this meeting. Barclays presented an updated preliminary valuation analysis based on the board case projections and the reviewed case projections. Barclays noted that the reviewed case projections reflected more optimistic assumptions and estimates by management on DRAM pricing in 2012 and SSD revenue and margins than the prior board case projections. Barclays then reviewed a summary of various valuation analyses, including a comparable company analysis, a discounted cash flow (“DCF”) analysis for both the reviewed case and the prior board case projections, based on five year projections, a precedent transaction analysis, a premiums paid analysis, and an LBO analysis for both the reviewed case and the board case projections. Barclays also reviewed various separation alternatives and considerations with respect to each. Barclays noted that the DCF valuation was less reliable than other methodologies for valuing the Company because of the weight given to the terminal value, and the inherent unpredictability of the accuracy of management’s projections in the later years. The Special Committee discussed the reviewed case projections with Barclays and the Company’s management. Representatives of management then left the meeting.

 

The Special Committee discussed the reviewed case projections and determined that management had addressed the Special Committee’s concerns, and that the reviewed case projections should be used for presentations to any bidders. The Special Committee then discussed the strategic alternatives available to the Company, including the risks and potential benefits associated with continuing as a stand-alone business. The Special Committee also discussed the possible spinoff of the SSD product line, noting that this alternative would likely not be viable for at least two years, with considerable execution risks, and noted the need for continuing significant investments in SSD. Following extensive discussion, the Special Committee concluded that, given the volatility of the Company’s stock price, and the significant risks to the business and the achievement of the operating plan, it was reasonable to continue discussions with the U.S. Sponsors to see if it was possible to elicit an attractive price. The Special Committee further determined that if the U.S. Sponsors were willing to propose an attractive price, the Special Committee would have Barclays conduct a confidential market check of other potential buyers. The Special Committee concluded that the next steps should be for Barclays and management to walk through the reviewed projections with the U.S. Sponsors, following the U.S. Sponsors executing an appropriate nondisclosure agreement with a standstill provision. The Special Committee requested that Barclays arrange a meeting with the U.S. Sponsors.

 

Later that day Ms. Alexy called Mr. Shah and Mr. Ken Hao of the U.S. Sponsors to introduce Barclays and to advise them of the proposal to have the U.S. Sponsors walk through the reviewed case projections.

 

On March 3, 2011, the U.S. Sponsors entered into a nondisclosure agreement with the Company. Mr. Zwarenstein and Mr. Won Kim, Principal Financial Analyst for the Company, met with Messrs. Hao, Shah and other representatives of the U.S. Sponsors and discussed the reviewed case projections. Barclays and Ms. Alexy were present at this meeting.

 

On March 7, 2011, our management made a follow-up presentation to the U.S. Sponsors responding to the U.S. Sponsors’ questions on the reviewed case projections. Barclays and Ms. Alexy were present at this presentation.

 

On March 10, 2011, the U.S. Sponsors submitted a nonbinding written proposal to acquire the Company for $8.25 per share in cash, accompanied by two letters from prospective lenders indicating that each lender was confident it would be able to arrange $300 million in debt financing for the transaction.

 

On March 11, 2011, Mr. Hao called a Barclays representative. The Barclays representative informed Mr. Hao that although the Special Committee was meeting to consider the proposal, he believed the Special Committee would conclude that it was insufficient to commence a detailed due diligence process. Mr. Hao indicated that the U.S. Sponsors had limited room to increase their price, but would consider an increase if it would permit commencement of a detailed due diligence process.

 

On March 12, 2011, the Special Committee held a telephonic meeting. Representatives of Kaye Scholer and Barclays attended the meeting. Barclays reviewed the terms of the U.S. Sponsors’ proposal and accompanying letters from potential lenders. Barclays also reviewed the conversation with Mr. Hao and

advised that the U.S. Sponsors would consider a price increase in order to commence a detailed due diligence process. Discussions ensued regarding the U.S. Sponsors’ proposal and process, as well as strategic alternatives available to the Company. Barclays representatives then left the meeting. The Special Committee then discussed the execution risks associated with achievement of the reviewed case projections. The Special Committee concluded that while a sale of the Company at $8.25 per share was not attractive to them, a sale at a materially higher price than the $8.25 per share offered by the U.S. Sponsors appeared at that point to be in the best interests of shareholders. The Special Committee discussed tactics to attempt to obtain a higher price from the U.S. Sponsors and a process to conduct a market check if an attractive proposal was received from the U.S. Sponsors. Upon receiving instructions from Ms. Alexy, Barclays communicated with the U.S. Sponsors that the price had to be $9.00 per share or more to permit commencement of detailed due diligence.

 

On March 20, 2011, Mr. Hao called Ms. Alexy and advised that the U.S. Sponsors were planning to revise their proposal to increase the price to $9.00 per share.

 

On March 21, 2011, the U.S. Sponsors submitted a nonbinding written proposal to acquire the Company, indicating that the U.S. Sponsors believed they could reach a valuation of $9.00 per share in cash, subject to confirmatory due diligence, the arrangement of satisfactory debt financing and the agreement of management to roll over a substantial portion of their equity.

 

On the evening of March 21, 2011, the Special Committee held a meeting. Representatives of Kaye Scholer and Barclays were present at the meeting by telephone. Ms. Alexy reviewed her conversation with Mr. Hao regarding the proposal. Barclays reviewed the terms of the revised U.S. Sponsors’ proposal, including the accompanying letters from potential lenders, and extensive discussion ensued. Barclays reviewed the summary valuation presentation previously presented on February 28, 2011. Kaye Scholer provided advice regarding the Special Committee’s fiduciary duties. The Special Committee determined to open a confirmatory due diligence process with the U.S. Sponsors, including management presentations and access to a dataroom. The Special Committee discussed with its advisors the previous indications of interest from Financial Buyer A and Financial Buyer B as well as other potential bidders, and then directed Barclays to contact Financial Buyer A and Financial Buyer B and four other third party financial buyers on a confidential basis. The Special Committee discussed the possibility based on the Special Committee’s knowledge of Financial Buyer A and Financial Buyer B that the two firms might seek to make a joint bid and the possible advantages and disadvantages of such a teaming arrangement and determined to permit teaming by those two firms if requested. The Special Committee determined to have another meeting to discuss a list of appropriate strategic buyers to contact.

 

Later on March 21, 2011, Ms. Alexy had a telephone conversation with Mr. MacKenzie concerning his willingness to roll over his equity and his views on the management team.

 

On March 22, 2011, Barclays and the U.S. Sponsors commenced a detailed due diligence process, which continued through April 25, 2011. Barclays representatives, and in most cases a member of the Special Committee, participated in all meetings and calls between management and all bidders, including the U.S. Sponsors. Simpson Thacher and the U.S. Sponsors’ other advisors participated in the detailed due diligence process.

 

Also on March 22, 2011, our Board held a meeting at our headquarters to discuss the reviewed case projections prepared by management, and adopted the plan for the last six months of fiscal 2011 as our revised operating plan. Ms. Alexy had conversations with Mr. MacKenzie and individual Special Committee members about potential strategic acquirers, as well as competitive and business risks associated with contacting them.

 

On March 23, 2011, Ms. Alexy contacted Financial Buyer A and Financial Buyer B to advise each of them that the Company was exploring alternative transaction proposals, and that Barclays would be contacting them. Each expressed interest in engaging in the process and confirmed to Ms. Alexy that they would be considering a joint bid. On that same day, Barclays sent nondisclosure agreements to Financial Buyer A and Financial Buyer B and commenced outreach to four additional financial buyers.

 

On March 24, 2011, the Special Committee held a telephonic meeting. Representatives of Kaye Scholer and Barclays attended the meeting. Barclays provided an update regarding contacts with Financial Buyer A,

Financial Buyer B and four additional financial buyers, which we refer to as Financial Buyers C, D, E and F. The Special Committee then discussed various potential strategic acquirers, their likely level of interest and possible competitive or business harm if they were contacted at this stage. The Special Committee discussed with Barclays the likely level of interest of the various identified strategic buyers. The Committee instructed Barclays to contact five potential strategic acquirers at that time, which we refer to as Strategic Buyers 1, 2, 3, 4 and 5.

 

On March 24, 2011, Barclays contacted Strategic Buyer 1. On March 25, 2011, Barclays sent nondisclosure agreements to Financial Buyers C and D and contacted Strategic Buyer 2.

 

On March 28, 2011, Ms. Alexy contacted a director of Strategic Buyer 3 to advise him of the process. Financial Buyer A and Financial Buyer B each executed their nondisclosure agreements and were granted permission to work together on a proposal. Barclays contacted Strategic Buyer 3 and the industry participant that had previously spoken to Mr. MacKenzie on August 25, 2011, which we refer to as Strategic Buyer 4. After discussions with Ms. Alexy, Mr. MacKenzie contacted Strategic Buyer 5 on behalf of the Special Committee.

 

On March 29, 2011, management made due diligence presentations to the U.S. Sponsors’ potential lenders. Later in the day, management made a due diligence presentation to Financial Buyers A and B.

 

On March 31, 2011, management made separate due diligence presentations to Financial Buyers C and D.

 

Late in the evening on March 31, 2011, Simpson Thacher delivered a draft merger agreement to Kaye Scholer.

 

On April 1, 2011, the Special Committee held a telephonic meeting. Ms. Alexy and Mr. McKenna noted that one or both of them had participated in all meetings and calls with all potential bidders. Barclays reviewed the results of their discussions with potential financial and strategic buyers to date, advising that a total of four financial buyers in addition to the U.S. Sponsors were now engaged in due diligence (Financial Buyers A, B, C and D) and that Financial Buyers A and B were working on a joint bid as expected. Management presentations had been made to all of these potential financial buyers. Barclays reported that Financial Buyers E and F had indicated they had no interest, that Strategic Buyer 1 had indicated no interest and that Strategic Buyer 4 had indicated potential interest only in the acquisition of the SSD and Brazil product lines. Barclays was waiting to hear back from the other three potential strategic buyers. The Special Committee requested that Barclays contact Strategic Buyer 4 again regarding its possible interest in the Company as a whole. Barclays then presented a preliminary analysis of a potential separation strategy for the SSD product lines as an alternative to the possible sale of the Company, and noted that the market timing of an IPO for the SSD product lines, and that the trading multiples that could be applicable, were speculative compared to the values realizable in a sale. Kaye Scholer reviewed preliminary comments regarding the draft merger agreement.

 

On April 6, 2011, Financial Buyers A and B delivered a joint nonbinding indication of interest at $9.25 per share in cash.

 

On April 8, 2011, the Special Committee held a telephonic meeting. Representatives of Kaye Scholer and Barclays were present. Barclays reviewed the results of the confidential market check. Barclays summarized the joint nonbinding indication of interest from Financial Buyers A and B at $9.25 per share, and explained that Financial Buyers A and B had commenced due diligence. Barclays discussed financial considerations and its valuation analysis and extensive discussion ensued. The Special Committee instructed Barclays to inform the U.S. Sponsors that a price increase may be necessary in light of competitive and market dynamics. The Special Committee discussed the alternatives available to the Company and concluded that it was reasonable to continue discussions with the U.S. Sponsors in light of the significant execution risks in the business, the volatility of the Company’s stock price and the other valuation metrics. Barclays then reported to the Special Committee that Financial Buyers C and D had each exited the process, but that Financial Buyer C had indicated that it might be willing to reengage during the go-shop period. Barclays confirmed that Financial Buyers E and F remained uninterested in discussions. Barclays reported that Strategic Buyer 3 had requested but not yet executed a nondisclosure agreement and Strategic Buyer 4 had confirmed that it had no interest in

an acquisition of the Company as a whole. Barclays also reported that Strategic Buyer 2 had exited the process, Strategic Buyer 1 had an initial negative reaction and Strategic Buyer 5 had not been reached. The Special Committee then discussed news reports that an industry participant, which we refer to as Strategic Buyer 6, was looking to make an investment in Brazil and that there was a strategic fit with Strategic Buyer 6. Accordingly, the Special Committee instructed Barclays to contact Strategic Buyer 6. A Kaye Scholer representative then reviewed the draft merger agreement in detail and Barclays and the Special Committee provided input.

 

On April 11, 2011, Barclays spoke with representatives of Financial Buyer A and Financial Buyer B, who advised that they would need several more days to assess the business further and then would advise on their willingness to engage fully in the due diligence process.

 

On April 13, 2011, Barclays contacted Strategic Buyer 6, and this potential acquirer indicated that it had no interest in the opportunity.

 

On April 14, 2011, Kaye Scholer provided comments on the merger agreement to Simpson Thacher.

 

On April 15, 2011, the Special Committee held a telephonic meeting. Representatives of Kaye Scholer and Barclays attended the meeting. Kaye Scholer provided an update on issues associated with the draft merger agreement. Barclays reported that the U.S. Sponsors had been apprised of the Special Committee’s position that an increase in purchase price was needed, and also had been told that we had received an indication of interest at a higher price. Barclays then discussed with the Special Committee a due diligence issue raised by the U.S. Sponsors and noted the possible adverse impact of this issue on cash expenditures in future years. Barclays also reported that Financial Buyers A and B had not yet engaged in significant due diligence and Strategic Buyer 3 had not yet signed its nondisclosure agreement. Barclays advised that they had still not been able to contact Strategic Buyer 5 and that Strategic Buyer 6 had confirmed that it had no interest in a transaction with the Company. The Special Committee discussed the possible interest of Strategic Buyers 3 and 4 in the SSD product lines as a split off. Barclays noted that this would be a difficult transaction to execute in the near future for significant value as the business would be treated as a startup business and would not likely receive full credit for its growth potential. Barclays then left the meeting. Extensive discussion ensued among the Special Committee regarding the transaction process, tactics to obtain an increased price from the U.S. Sponsors, and the Company’s strategic alternatives and prospects, including current views regarding the quarter and various concerns about the revenue ramp and current and projected financial performance of the SSD product lines.

 

On April 18, 2011, Financial Buyers A and B advised Barclays that they were dropping out of the process.

 

On April 19, 2011, Simpson Thacher provided Kaye Scholer a markup of the merger agreement, responding to Kaye Scholer comments, as well as draft forms of an equity commitment letter and a limited guarantee. Representatives of Kaye Scholer and Simpson Thacher held telephonic discussions to discuss and negotiate the draft of the merger agreement, equity commitment letter, limited guarantee and related transaction documents from time to time.

 

On April 21, 2011, the Special Committee held a telephonic meeting. Representatives of Kaye Scholer and Barclays attended the meeting. Barclays reported on developments with other potential buyers, noting that Financial Buyers A and B had dropped out of the process, Barclays also reported that Strategic Buyer 3 had signed a nondisclosure agreement and had a management presentation scheduled for the following day. Barclays reported that they had not been able to obtain a response from the Strategic Buyer 5. Barclays reported that the U.S. Sponsors had advised that they would have debt commitment letters from two banks. Barclays reported on the U.S. Sponsors’ concerns regarding issues it had discovered in due diligence that impacted its valuation, and the adverse impact this issue was having on the U.S. Sponsors’ view of the purchase price that they could afford to offer.

 

Kaye Scholer briefed the Special Committee on the status of merger negotiations, including the outstanding issues under negotiation. The Special Committee provided input on these terms. The Special Committee then discussed the various strategic alternatives available to the Company at this time, including the sale of the Company or the pursuit of our current operating plan and the later possible sale or spinoff of

the enterprise SSD product line. The Special Committee also discussed the preliminary valuation analysis previously provided by Barclays. The Special Committee concluded that a price of $9.25 or higher would be an attractive price for the Company, given the ongoing significant risks of the business and the risks in achieving the results contemplated by the reviewed case projections and the absence of a meaningful competing offer from another bidder. The Special Committee took note of the go-shop process as a method to provide a check on the price if an agreement to sell the Company were reached. The Special Committee determined to continue negotiations with the U.S. Sponsors and determined that the U.S. Sponsors would only be permitted to talk to the Company’s management about a possible equity rollover in the event that substantially final terms for the acquisition of the Company had been tentatively reached.

 

Later on April 21, 2011, Barclays and Kaye Scholer engaged in separate negotiations with the U.S. Sponsors and Simpson Thacher regarding the financial and legal terms for the merger. Barclays conveyed the message from the Special Committee that it was prepared to proceed if the U.S. Sponsors increased their proposal to at least $9.25 per share and made certain merger agreement concessions. Mr. Hao subsequently called representatives from Barclays and indicated that the U.S. Sponsors were prepared to proceed at a price of $9.25 per share if satisfactory resolution of other terms could be reached.

 

On April 22, 2011, the Special Committee held a telephonic meeting. Representatives of Kaye Scholer and Barclays were present at the meeting. Discussion ensued regarding the negotiations with the U.S. Sponsors and the Special Committee provided input on outstanding issues. The Special Committee agreed that the U.S. Sponsors could speak to management regarding a potential equity rollover if these terms were resolved satisfactorily.

 

Later on April 22, 2011, management made a due diligence presentation to Strategic Buyer 3. In addition, Kaye Scholer and Simpson Thacher continued to negotiate the merger agreement. Kaye Scholer kept the Special Committee apprised of these negotiations and received approval by the Committee members of the negotiated terms. Later that day, Simpson Thacher provided the draft debt commitment letters and the form of rollover agreements for review by Kaye Scholer. The U.S. Sponsors commenced conversations with Mr. MacKenzie regarding the terms of the rollover.

 

Over the course of April 22 through April 25, 2011, representatives of Kaye Scholer and Simpson Thacher continued to discuss and negotiate the draft merger agreement, form of equity commitment letter, form of limited guarantee, draft debt commitment letters and related transactions from time to time.

 

On April 24, 2011, the Special Committee held a telephonic meeting. Representatives of Kaye Scholer and Barclays were present at the meeting. Kaye Scholer reviewed the current draft of the merger agreement, the limited guarantees and equity commitments and Ms. Alexy reported that Mr. MacKenzie was now in negotiations relating to a potential rollover of senior management’s equity. Barclays and Kaye Scholer reviewed the terms of the rollover agreements. Barclays and Kaye Scholer advised the Special Committee regarding the debt commitment letters, including the financial terms and the conditions. Barclays then reported on the April 22 due diligence presentation attended by Strategic Buyer 3, which both Barclays and Ms. Alexy viewed as a positive meeting, but noted that Strategic Buyer 3 had not yet communicated its level of continuing interest following the presentation. Barclays noted that Strategic Buyer 3 could continue the process during the go-shop period.

 

On April 25, 2011, the Special Committee held telephonic meetings to discuss the outstanding matters. Representatives of Kaye Scholer and Barclays were present. An outline of the Barclays valuation presentation was discussed. The Special Committee requested that Barclays provide their valuation analyses.

 

On the evening of April 25, 2011, the Special Committee held another telephonic meeting. Representatives of Kaye Scholer and Barclays were present at the meeting. Barclays representatives reviewed Barclays’ valuation presentation with the Special Committee. Barclays summarized the terms of the proposed transaction and debt commitment letters. Barclays summarized the projections used in the financial analyses. Barclays noted that the reviewed case projections reflected more optimistic assumptions and estimates as to the future financial performance of the Company than the board case projections. Barclays advised the Special Committee that, given the inherent uncertainties and difficulties in accurately projecting our financial results on a five-year basis, and the emphasis on terminal values, Barclays had given considerably greater weight to

the projections through fiscal 2014. Barclays reviewed a summary valuation analysis, comparable company analyses, DCF analyses, sum of the parts valuation analyses, a precedent transaction analysis, premiums paid analyses and leveraged buyout analyses. Barclays also provided a summary to the Special Committee regarding the market check performed by Barclays, including a list of financial and strategic buyers contacted and the status of each, and noted the merger agreement being negotiated with the U.S. Sponsors contained a “go-shop” provision which would allow the process to continue. Following this presentation, Barclays rendered its oral opinion (which was subsequently confirmed in writing) that, as of such date and based upon and subject to the qualifications, limitations and assumptions stated in its opinion, the consideration to be offered to the shareholders (other than Parent and its affiliates) of the Company is fair, from a financial point of view, to such shareholders. After discussing Barclays’ analyses and reviewing Barclays’ fairness opinion and the transaction agreements, and taking into account the rollover commitments being entered into by Mr. MacKenzie and other executive officers and employees, our Special Committee unanimously determined that the Merger Agreement and the transactions contemplated thereby, including the Merger, are advisable, fair (both substantively and procedurally) to and in the best interests of the Company as a whole and our unaffiliated shareholders and determined to recommend that our Board approve and declare the Merger Agreement and the transactions contemplated thereby, including the Merger, advisable, fair (both substantively and procedurally) to and in the best interests of the Company as a whole and our unaffiliated shareholders and recommend that our shareholders, including our unaffiliated shareholders, approve the Merger Proposal.

 

After the conclusion of the Special Committee meeting, our Board of Directors held a telephonic meeting. Representatives of Kaye Scholer and Barclays were present. Also present were Mr. Goldberg and a representative of Davis Polk & Wardwell, counsel to the Company. Mr. Shah and Mr. Patel, who is an investor in Silver Lake Sumeru Fund, L.P., each advised that they intended to abstain from voting on the transaction. Kaye Scholer advised the Board with respect to its fiduciary duties and reviewed the principal terms of the Merger Agreement, the equity commitment letter, the limited guarantees and the debt commitment letters. Barclays shared the valuation presentation previously given to the Special Committee. Our Special Committee then reported its recommendation to our Board that our Board approve and declare the Merger Agreement and the transactions contemplated thereby, including the Merger, advisable, fair (both substantively and procedurally) to and in the best interests of the Company as a whole and our unaffiliated shareholders and recommend that our shareholders, including our unaffiliated shareholders, approve the Merger Proposal. Our Board of Directors, after careful consideration, and acting upon the unanimous recommendation of our Special Committee, unanimously (with Messrs. Shah and Patel abstaining) approved and declared the Merger Agreement and the transactions contemplated thereby, including the Merger, advisable, fair (both substantively and procedurally) to and in the best interests of the Company as a whole and our unaffiliated shareholders and recommended that our shareholders, including our unaffiliated shareholders, approve the Merger Proposal at an extraordinary general meeting.

 

In the early morning hours of April 26, 2011, the Company, Parent and Merger Sub executed the Merger Agreement, the U.S. Sponsors and the Company executed the limited guarantees, the U.S. Sponsors and Parent executed the equity commitment letter, and the agreements between various executive offers and Parent regarding the rollover of equity were executed by the parties thereto. Prior to the opening of the market on April 26, 2011, the parties issued a press release announcing the Merger Agreement.

 

On April 25, 2011, our Special Committee, consisting entirely of independent and disinterested directors, unanimously determined that the Merger Agreement and the transactions contemplated thereby, including the Merger, are advisable, fair (both substantively and procedurally) to and in the best interests of the Company as a whole and our unaffiliated shareholders and recommended that our Board of Directors:

 

 

Also on April 25, 2011, at a special meeting of our Board of Directors after careful consideration and acting upon the unanimous recommendation of our Special Committee, our Board of Directors unanimously (with two directors abstaining):

 

 

In the course of our Special Committee making the determinations described above, our Special Committee consulted with our management, as well as its own legal and financial advisors, and considered the following potentially positive factors (which are not intended to be exhaustive and are not in any relative order of importance):

 

 

 

 

 

 

 

 

 

 

Our Special Committee also believed that sufficient procedural safeguards were and are present to ensure the fairness of the Merger and to permit our Special Committee to represent effectively the interests of our unaffiliated shareholders. These procedural safeguards include the following (which are not intended to be exhaustive and are not in relative order of importance):

 

 

 

 

 

Our Special Committee also considered a number of potentially negative factors in its deliberations concerning the Merger, including, but not limited to the following factors (which are not intended to be exhaustive and are not in relative order of importance):

 

 

 

During their consideration of the transaction with Parent, the Special Committee was also aware that some of our directors and executive officers may have interests in the Merger that may be different from, or in addition to, those of our shareholders generally, as described under “The Merger — Interests of the Company’s Directors and Officers in the Merger” beginning on page [ • ].

 

Our Special Committee did not separately consider net book value or bankruptcy liquidation value in determining the fairness of the Merger to our unaffiliated shareholders. Our Special Committee noted that the Company continues to be viable as a going concern and that liquidation was not considered a viable alternative to the Company remaining an independent business or the sale of the company as a going concern. Our Special Committee did not consider our net book value as a factor because it believes that net book value is an accounting concept that is not a material indicator of our value as a going concern but rather is indicative of historical costs. Additionally, the Special Committee did not seek to establish a pre-merger going concern value for our Common Stock to determine the fairness of the Merger Consideration to our unaffiliated shareholders. Our Special Committee believes that the trading price of our Common Stock represents the best available indicator of our going concern valuation and that the Merger Consideration is fair to our unaffiliated shareholders relative to such value for the reasons noted above.

 

Our Special Committee did not structure the transaction to require approval of at least a majority of the unaffiliated security holders or retain an unaffiliated representative to act solely on behalf of unaffiliated shareholders for purposes of negotiating the terms of the Merger Agreement. Nevertheless our Special Committee believed that, taking into account the factors listed above, the absence of these two safeguards did not diminish the fairness of the process undertaken by our Special Committee.

 

Our Special Committee did not consider purchase prices paid in the last two years for shares of our Common Stock by Mr. MacKenzie or Mr. Shah, because other than the exercise by Mr. MacKenzie of Company Stock options previously granted to him by the Compensation Committee at fair market value on the date of grant, as described under “ Common Stock Transaction Information ” beginning on page [ • ], which transactions were for values less than the Merger Consideration, neither Mr. MacKenzie nor Mr. Shah has purchased shares of our Common Stock during the past two years.

 

Our Special Committee and our Board of Directors considered the potentially negative and potentially positive factors summarized above, and they each concluded that, overall, the potentially positive factors outweighed the potentially negative factors.

 

The foregoing discussion of the factors considered by our Special Committee is not intended to be exhaustive, but rather includes the principal factors considered by our Special Committee in its consideration of the Merger. Our Special Committee reached the unanimous decision to recommend that our Board of Directors approve and declare the Merger Agreement and the transactions contemplated thereby, including the Merger, advisable, fair (both substantively and procedurally) to and in the best interests of the Company as a whole and our unaffiliated shareholders, and that our shareholders, including our unaffiliated shareholders, approve the Merger Proposal, in light of the factors described above and other factors that each member of our Special Committee felt were appropriate. In view of the variety of factors and the quality and amount of information considered, our Special Committee did not find it practicable to and did not attempt to quantify, rank or otherwise assign relative weights to the specific factors considered in reaching its determinations, and did not undertake to make any specific determination as to whether any particular factor, or any aspect of a particular factor, was favorable or unfavorable to the ultimate determination of our Special Committee. In considering the factors described above, addition, individual members of our Special Committee may have given different weight to different factors. Our Special Committee based its recommendation on the totality of the information presented to and considered by it.

 

Our Board of Directors, after receiving the recommendation of our Special Committee, adopted our Special Committee’s analysis and unanimously (with Messrs. Shah and Patel abstaining) approved and declared that the Merger Agreement and the transactions contemplated thereby, including the Merger, are

advisable, fair (both substantively and procedurally) to and in the best interest of the Company as a whole and its unaffiliated shareholders and recommends that our shareholders, including our unaffiliated shareholders, approve the Merger Proposal. In making these determinations, our Board of Directors considered, notwithstanding the fact that Barclay’s opinion was not delivered to the Board of Directors and the Board of Directors is not entitled to rely on such opinion, the fact that the Special committee received an opinion from Barclays dated April 25, 2011, as described above.

 

The Special Committee engaged Barclays Capital Inc. (“Barclays”) to act as its financial advisor with respect to the pursuit of strategic alternatives for the Company, including a possible sale of the Company. On April 25, 2011, Barclays rendered its oral opinion (which was subsequently confirmed in writing) to the Special Committee that, as of such date and based upon and subject to the qualifications, limitations and assumptions stated in its opinion, the consideration to be offered to the shareholders (other than Parent and its affiliates) of the Company is fair, from a financial point of view, to such shareholders.

 

The full text of Barclays’ written opinion, dated as of April 25, 2011, is attached as Annex B to this proxy statement. Barclays’ written opinion sets forth, among other things, the assumptions made, procedures followed, factors considered and limitations upon the review undertaken by Barclays in rendering its opinion. You are encouraged to read the opinion carefully in its entirety. The following is a summary of Barclays’ opinion and the methodology that Barclays used to render its opinion. This summary is qualified in its entirety by reference to the full text of the opinion.

 

Barclays’ opinion, the issuance of which was approved by Barclays’ Fairness Opinion Committee, is addressed to the Special Committee, addresses only the fairness, from a financial point of view, of the consideration to be offered to the shareholders (other than Parent and its affiliates) of the Company and does not constitute a recommendation to any shareholder of the Company as to how such shareholder should vote with respect to the Merger or any other matter. The terms of the Merger were determined through arm’s-length negotiations between the Company and Parent and were approved by the Company’s Board of Directors. Barclays did not recommend any specific form of consideration to the Company or that any specific form of consideration constituted the only appropriate consideration for the Merger. Barclays was not requested to address, and its opinion does not in any manner address, the Company’s underlying business decision to proceed with or effect the Merger. In addition, Barclays expressed no opinion on, and its does not in any manner address, the fairness of the amount or the nature of any compensation to any officers, directors or employees of any parties to the Merger, or any class of such persons, relative to the consideration to be offered to the shareholders of the Company in the proposed transaction. No limitations were imposed by the Special Committee upon Barclays with respect to the investigations made or procedures followed by it in rendering its opinion.

 

In arriving at its opinion, Barclays, among other things:

 

 

 

In arriving at its opinion, Barclays assumed and relied upon the accuracy and completeness of the financial and other information used by Barclays without any independent verification of such information. Barclays also relied upon the assurances of management of the Company that they were not aware of any facts or circumstances that would make such information inaccurate or misleading. With respect to the Board Case Projections and the Reviewed Case Projections, upon advice and direction of the Special Committee and the Company, Barclays assumed that such projections were reasonably prepared by management of the Company. Furthermore, given the inherent uncertainties and difficulties in accurately projecting the financial results of the Company on a five-year basis, Barclays gave considerably greater weight to the portion of the Company Projections through the Company’s fiscal year ending in 2014 for purposes of Barclays’ analyses and opinion. In arriving at its opinion, Barclays assumed no responsibility for and expressed no view as to any such Company Projections or estimates or the assumptions on which they were based. In arriving at its opinion, Barclays did not conduct a physical inspection of the properties and facilities of the Company and did not make or obtain any evaluations or appraisals of the assets or liabilities of the Company. Barclays’ opinion was necessarily based upon market, economic and other conditions as they existed on, and could be evaluated as of, April 25, 2011. Barclays assumed no responsibility for updating or revising its opinion based on events or circumstances that may have occurred after April 25, 2011.

 

In connection with rendering its opinion, Barclays performed certain financial, comparative and other analyses as summarized below. In arriving at its opinion, Barclays did not ascribe a specific range of values to the Common Stock but rather made its determination as to fairness, from a financial point of view, to the Company’s shareholders (other than Parent and its affiliates) of the consideration to be offered to such shareholders in the Merger on the basis of various financial and comparative analyses. The preparation of a fairness opinion is a complex process and involves various determinations as to the most appropriate and relevant methods of financial and comparative analyses and the application of those methods to the particular circumstances. Therefore, a fairness opinion is not readily susceptible to summary description.

 

In arriving at its opinion, Barclays did not attribute any particular weight to any single analysis or factor considered by it but rather made qualitative judgments as to the significance and relevance of each analysis and factor relative to all other analyses and factors performed and considered by it and in the context of the circumstances of the Merger. Accordingly, Barclays believes that its analyses must be considered as a whole,

as considering any portion of such analyses and factors, without considering all analyses and factors as a whole, could create a misleading or incomplete view of the process underlying its opinion.

 

The following is a summary of the material financial analyses used by Barclays in preparing its opinion to the Special Committee. Certain financial analyses summarized below include information presented in tabular format. In order to fully understand the financial analyses used by Barclays, the tables must be read together with the text of each summary, as the tables alone do not constitute a complete description of the financial analyses. In performing its analyses, Barclays made numerous assumptions with respect to industry performance, general business and economic conditions and other matters, many of which are beyond the control of the Company or any other parties to the Merger. None of the Company, Parent, Merger Sub, Barclays or any other person assumes responsibility if future results are materially different from those discussed. Any estimates contained in these analyses are not necessarily indicative of actual values or predictive of future results or values, which may be significantly more or less favorable than as set forth below. In addition, analyses relating to the value of the businesses do not purport to be appraisals or reflect the prices at which the businesses may actually be sold.

 

Historical Share Price Analysis

 

To illustrate the trend in the historical trading prices of the Common Stock, Barclays considered historical data with regard to the trading prices of the Common Stock for the period from February 3, 2006 to April 21, 2011 and compared such data with the indexed share price performances during the same periods of a composite of the selected companies listed under the caption “Selected Comparable Company Analysis” below.

 

Barclays noted that during the period from February 3, 2006 (the date the Common Stock began trading following the Company’s initial public offering) to April 21, 2011, the indexed price of the Common Stock decreased 6.2%, compared to: (i) a composite of selected memory/electronic manufacturing services companies, which, on average, decreased 13.8%; (ii) a composite of selected technology companies in Brazil, which, on average, decreased 47.8%; (iii) OCZ Technology Group, Inc., or OCZ, which increased 30.3%; and (iv) STEC, Inc., or STEC, which increased 365.9%. Barclays also noted that during the 18-month period from October 21, 2009 to April 21, 2011, the indexed price of the Common Stock increased 104.9%, compared to: a composite of selected memory/electronic manufacturing services companies, which, on average, increased 53.2%; a composite of selected technology companies in Brazil, which, on average, decreased 45.8%; OCZ, which increased 30.3%; and STEC, which decreased 20.3%. Barclays further noted that during the year to date period from January 1, 2011 to April 21, 2011, the indexed price of the Common Stock increased 39.1%, compared to: a composite of selected memory/electronic manufacturing services companies, which, on average, decreased 0.6%; a composite of selected technology companies in Brazil, which, on average, decreased 18.1%; OCZ, which increased 55.4%; and STEC, which increased 13.0%.

 

Selected Comparable Company Analysis

 

In order to assess how the public market values shares of similar publicly traded companies, Barclays reviewed and compared specific financial and operating data relating to the Company with selected companies that Barclays, based on its experience in the electronics industry, deemed comparable to the Company. Although none of the following companies is identical to the Company, Barclays selected these companies because they have publicly traded equity securities and were deemed to be comparable to the Company because of similarities to the Company in one or more of the business, operating, regional or end-market characteristics. The selected comparable memory/electronic manufacturing services companies (“Memory/EMS Comps”) were:

 

 

 

The selected comparable technology companies in Brazil (“Brazil Tech Comps”) were:

 

 

Barclays calculated and compared various financial multiples and ratios of the Company and the selected comparable companies. As part of its selected comparable company analysis, Barclays calculated and analyzed each company’s ratio of its current share price to its projected earnings per share (commonly referred to as a price earnings ratio, or P/E), and each company’s enterprise value to certain projected financial criteria (such as revenue, and earnings before interest, taxes, depreciation and amortization, or EBITDA). The enterprise value of each company was obtained by adding its short and long-term debt to the sum of the market value of its common equity, the book value of any minority interest, and subtracting its cash and cash equivalents. All of these calculations were performed, and based on publicly available financial data (including Wall Street research estimates and FactSet) and closing prices, as of April 21, 2011, the last trading date prior to the delivery of Barclays’ opinion. The following table summarizes the results of these calculations.

 

 

 

 

Barclays selected the comparable companies listed above because of similarities to the Company in one or more business, operating, regional or end-market characteristics. However, because no selected comparable company is exactly the same as the Company, Barclays believed that it was inappropriate to, and therefore did not, rely solely on the quantitative results of the selected comparable company analysis. Accordingly, Barclays also made qualitative judgments concerning differences between the business, financial and operating characteristics and prospects of the Company and the selected comparable companies that could affect the public trading values of each in order to provide a context in which to consider the results of the quantitative analysis. These qualitative judgments related primarily to the differing sizes, sector overlaps, growth prospects, profitability levels and degree of operational risk between the Company and the companies included in the selected company analysis. Based upon these judgments, Barclays selected a range of 5.0x to 6.0x multiples of calendar year 2011 estimated enterprise value/EBITDA, 4.0x to 5.0x multiples of calendar year 2012 estimated enterprise value/EBITDA, 10.0x to 13.0x multiples of calendar year 2011 estimated P/E and 8.0x and 11.0x multiples of calendar year 2012 estimated P/E for the Company and applied such ranges to Wall Street’s

projections to calculate a range of implied prices per share of the Company. The following table summarizes the results of these calculations:

 

 

Barclays noted that on the basis of the selected comparable company analysis, the transaction consideration of $9.25 per share was (i) above the range of implied values per share calculated on a standalone basis using the calendar year 2011 and 2012 estimated enterprise value/EBITDA comparable company analysis and (ii) within the range of implied values per share calculated on a standalone basis using the calendar year 2011 and 2012 estimated P/E comparable company analysis.

 

Discounted Cash Flow Analysis

 

In order to estimate the present value of the Common Stock, Barclays performed a discounted cash flow analysis of the Company. A discounted cash flow analysis is a traditional valuation methodology used to derive a valuation of an asset by calculating the “present value” of estimated future cash flows of the asset. “Present value” refers to the current value of future cash flows or amounts and is obtained by discounting those future cash flows or amounts by a discount rate that takes into account macroeconomic assumptions and estimates of risk, the opportunity cost of capital, expected returns and other appropriate factors.

 

To compute the estimated enterprise value of the Company using the discounted cash flow method, Barclays calculated (i) the Company’s projected after-tax unlevered free cash flows for fiscal years 2012 through 2014 based on the Board Case Projections (the “3 Year Board Case DCF Analysis”) and the Reviewed Case Projections (the “3 Year Reviewed Case DCF Analysis” and together with the 3 Year Board Case DCF Analysis, the “3 Year DCF Analyses”), and the Company’s projected after-tax unlevered free cash flows for fiscal years 2012 through 2016 based on the Board Case Projections (the “5 Year Board Case DCF Analysis”) and the Reviewed Case Projections (the “5 Year Reviewed Case DCF Analysis” and together with the 5 Year Board Case DCF Analysis, the “5 Year DCF Analyses”) and (ii) the “terminal value” of the Company as of August 27, 2014 for the 3 Year DCF Analyses and August 27, 2016 for the 5 Year DCF Analyses, Barclays discounted such amounts to their present value using a range of selected discount rates as further described below and then added the discounted after-tax unlevered free cash flows to the discounted terminal values to derive the estimated enterprise value of the Company. The after-tax unlevered free cash flows were calculated by taking the Company’s projections of the after-tax unlevered net income, adding depreciation and subtracting capital expenditures and adjusting for changes in working capital. The residual value of the Company at the end of the forecast period, or “terminal value,” was estimated by selecting a range of terminal value multiples based on estimated EBITDA for the last twelve months ending August 27, 2014 for the 3 Year DCF Analyses and August 27, 2016 for the 5 Year DCF Analyses of 4.0x to 5.0x, which was derived by analyzing the results from the selected comparable company analysis and takes into account qualitative judgments as to the future financial performance of the Company and applying such range to the Board Case Projections and the Reviewed Case Projections. The range of discount rates of 12.0% to 14.0% was selected based on an analysis of the weighted average cost of capital of the Company and the comparable companies listed above. Barclays then calculated a range of implied present value prices per share of the Company by subtracting estimated net debt as of August 27, 2011 of $80.3 million from the estimated enterprise value using the discounted cash

flow method and dividing such amount by the estimated fully diluted number of shares of Common Stock. The following table summarizes the results of these calculations:

 

 

Barclays noted that on the basis of the discounted cash flow analysis, the transaction consideration of $9.25 per share was: (i) above the range of implied values per share calculated using the 3 Year Board Case DCF Analysis, (ii) within the range of implied values per share calculated using the 3 Year Reviewed Case DCF Analysis and the 5 Year Board Case DCF Analysis, and (iii) below the range of implied values per share calculated using the 5 Year Reviewed Case DCF Analysis. Furthermore, given the inherent uncertainties and difficulties in accurately projecting the financial results of the Company on a five-year basis, Barclays gave considerably greater weight to the portion of the Company Projections through the Company’s fiscal year ending in 2014 for purposes of Barclays’ analyses and opinion.

 

Sum of the Parts Valuation Analysis

 

Barclays conducted a sum of the parts valuation analysis to calculate the enterprise value of two components of the Company’s business (its storage component, (“StorageCo”), and its memory component, “MemoryCo”)) on a stand-alone basis, using a discounted enterprise value methodology, multiples methodology and the forecasts provided by the Company. In its analysis, and upon advice of the Company’s management, Barclays assumed a cash-free, debt-free separation of StorageCo, a StorageCo tax rate of 10.0% and standalone corporate overhead.

 

In order to estimate the present value of StorageCo, Barclays performed a discounted enterprise value analysis of StorageCo. A discounted enterprise value analysis is a valuation methodology used to provide insight into the estimated “future enterprise value” of the segment as a function of the segment’s estimated future unlevered net income and a potential range of aggregate value to net income multiples. The resulting value is subsequently discounted to arrive at a “present value” for such company’s stock price. For the “future enterprise value” Barclays assumed a multiple range of 10.0x to 15.0x management’s estimated calendar year 2014 unlevered net income, for both the Board Case Projections and the Reviewed Case Projections, which was derived by analyzing the results from an analysis of selected comparable companies and takes into account qualitative judgments as to the future financial performance of StorageCo. “Present value” refers to the current value of estimated future value and is obtained by discounting the future value by a discount rate range of 15.0% to 25.0% for StorageCo as a standalone entity that takes into account macroeconomic assumptions and estimates of risk, the opportunity cost of capital, expected returns and other appropriate factors.

 

For MemoryCo, Barclays assumed a multiple range of 3.5x to 4.5x management’s estimated calendar year 2012 EBITDA, for both the Board Case Projections and the Reviewed Case Projections, which was derived by analyzing the results from an analysis of selected comparable companies and takes into account qualitative judgments for MemoryCo. Barclays took the aggregate value of the combined operations, netted their value against the Company’s estimated current net cash and debt balance at the end of the second quarter of fiscal year 2011 and divided such amount by the fully diluted number of shares of Common Stock to imply a per share value for the Common Stock. The following table summarizes the results of these calculations:

 

Barclays noted that on the basis of the sum of the parts valuation analysis, the transaction consideration of $9.25 per share was within the range of implied values per share calculated using the Board Case Projections and the Reviewed Case Projections.

 

Selected Precedent Transaction Analysis

 

Barclays reviewed and compared the purchase prices and financial multiples paid in selected other transactions that Barclays, based on its experience with merger and acquisition transactions, deemed relevant. Barclays chose such transactions based on, among other things, the similarity of the applicable target companies in the transactions to the Company with respect to the size, mix, margins and other characteristics of their businesses. For each of these selected transactions, using publicly available information, Barclays calculated the multiples of enterprise value implied by the transaction to last twelve months revenue and last twelve months EBITDA.

 

 

The reasons for and the circumstances surrounding each of the selected precedent transactions analyzed were diverse and there are inherent differences in the business, operations, financial conditions and prospects of the Company and the companies included in the selected precedent transaction analysis. Accordingly, Barclays believed that a purely quantitative selected precedent transaction analysis would not be particularly meaningful in the context of considering the proposed transaction. Barclays therefore made qualitative judgments concerning differences between the characteristics of the selected precedent transactions and the proposed transaction which would affect the acquisition values of the selected target companies and the Company. Based upon these judgments, Barclays selected a range of 0.40x to 0.80x multiples of last twelve months revenue to enterprise value and 5.0x to 7.5x of last twelve months EBITDA to enterprise value and applied such ranges to Wall Street’s projections to calculate a range of implied prices per share of the Company. The following table summarizes the transactions analyzed based on such characteristics and the results of these calculations:

 

 

Barclays noted that on the basis of the selected precedent transaction analysis, the transaction consideration of $9.25 per share was within the range of implied values per share calculated using Wall Street’s projections.

Premiums Paid Analysis

 

In order to assess the premium offered to the shareholders of the Company in the Merger relative to the premiums offered to shareholders in other transactions, Barclays reviewed the premiums paid in 22 transactions between domestic technology companies and both financial and a strategic buyers, and 24 take-private transactions in all industries worldwide, of companies valued between $300 million and $1 billion since January 1, 2010. For each transaction, Barclays calculated the premium per share paid by the acquirer by comparing the announced transaction value per share to the target company’s price during the following periods: (i) one trading day prior to announcement, and (ii) 30 calendar days prior to announcement. The following table summarizes the results of this review:

 

 

The reasons for and the circumstances surrounding each of the transactions analyzed in the transaction premium analysis were diverse and there are inherent differences in the business, operations, financial conditions and prospects of the Company and the companies included in the transaction premium analysis. Accordingly, Barclays believed that a purely quantitative transaction premium analysis would not be particularly meaningful in the context of considering the proposed transaction. Barclays therefore made qualitative judgments concerning the differences between the characteristics of the selected transactions and the proposed transaction which would affect the acquisition values of the target companies and the Company. Based upon these judgments, Barclays selected a range of 14% to 39% to the closing price of the Common Stock on April 21, 2011, and a range of 23% to 42% to the closing price of the Common Stock on March 21, 2011, to calculate a range of implied prices per share of the Company. The following table summarizes the results of these calculations:

 

 

Barclays noted that on the basis of the transaction premium analysis, the transaction consideration of $9.25 per share was within the range of implied values per share calculated using the closing price of the Common Stock on April 21, 2011 and March 21, 2011.

 

Leveraged Buyout Analysis

 

Barclays performed a leveraged buyout analysis in order to ascertain a price per share for the Common Stock which might be achieved in a leveraged buyout transaction with a financial buyer using a debt capital structure consistent with the proposed transaction and based upon current market conditions. Barclays assumed the following in its analysis: (i) a debt capital structure of the Company comprised of $300 million of term loan, similar to the proposed transaction, (ii) an equity investment that would achieve a rate of return of approximately 20% to 30% over 5 years, and (iii) a terminal value multiple of 4.5x of projected 5 year forward twelve month EBITDA, which was derived by analyzing the results from an analysis of selected comparable companies and takes into account qualitative judgments as to the future financial performance of the Company. Barclays applied these assumptions to the Board Case Projections and the Reviewed Case Projections, adjusted to eliminate the estimated public company costs provided by the Company’s

management, to calculate a range of implied prices per share of the Company. The following table summarizes the results of these calculations:

 

 

Barclays noted that on the basis of the leveraged buyout analysis, the transaction consideration of $9.25 per share was above the range of implied values per share calculated using the Board Case Projections and within the range of implied values per share calculated using the Reviewed Case Projections.

 

General

 

Barclays is an internationally recognized investment banking firm and, as part of its investment banking activities, is regularly engaged in the valuation of businesses and their securities in connection with mergers and acquisitions, investments for passive and control purposes, negotiated underwritings, competitive bids, secondary distributions of listed and unlisted securities, private placements and valuations for estate, corporate and other purposes. The Special Committee selected Barclays because of its familiarity with the Company and the industries in which the Company operates and its qualifications, reputation and experience in the valuation of businesses and securities in connection with mergers and acquisitions generally, as well as substantial experience in transactions comparable to the proposed transaction.

 

Barclays is acting as financial advisor to the Special Committee in connection with the Merger. Pursuant to the terms of the engagement letter between Barclays and the Special Committee, as compensation for its services in connection with the proposed transaction, the Company paid Barclays a fee of $2,000,000 upon the delivery of Barclays’ opinion. In addition, the Company agreed to pay Barclays, upon the closing of the Merger, a fee equal to 1.0% of the transaction value, or approximately $6.526 million based on an estimated transaction value of $652.6 million, with the amount paid for the Barclays opinion to be credited against such fee. In addition, the Company has agreed to reimburse Barclays for a portion of its expenses incurred in connection with the proposed transaction and to indemnify Barclays for certain liabilities that may arise out of its engagement by the Special Committee and the rendering of Barclays’ opinion. Barclays has performed various investment banking and financial services for the Company in the past, and expects to perform such services in the future, and expects to receive customary fees for such services. In addition, Barclays and its affiliates in the past have provided, or in the future may provide, investment banking and other financial services to the Sponsors and certain of their respective affiliates and portfolio companies and have received or in the future may receive customary fees for rendering such services, including (i) having acted or acting as financial advisor to the Sponsors and certain of their respective portfolio companies and affiliates in connection with certain mergers and acquisition transactions, (ii) having acted or acting as arranger, bookrunner and/or lender for the Sponsors and certain of their respective portfolio companies and affiliates in connection with the financing for various acquisition transactions, (iii) having acted or acting as underwriter, initial purchaser and placement agent for various equity and debt offerings undertaken by the Sponsors and certain of their respective portfolio companies and affiliates, and (iv) having acted or acting as solicitation agent for various consent solicitations undertaken by the Sponsors and certain of their respective portfolio companies and affiliates.

 

In addition to the presentation made on April 25, 2011 to our Special Committee summarized above, Barclays also made written and oral presentations, including valuation analyses to our Special Committee on January 17, 2011 and February 28, 2011. Copies of these other written presentations by Barclays to our Special Committee have been included as Exhibits to the Schedule 13E-3 filed with the SEC in connection with the Merger. The full text of Barclays’ presentations are also available for inspection and copying at our corporate offices during our regular business hours by any of our shareholders, or by a shareholder’s representative who has been so designated in writing.

Barclays and its affiliates engage in a wide range of businesses from investment and commercial banking, lending, asset management and other financial and non-financial services. In the ordinary course of its business, Barclays and its affiliates may actively trade and effect transactions in the equity, debt and/or other securities (and any derivatives thereof) and financial instruments (including loans and other obligations) of the Company, the Sponsors and their respective affiliates and portfolio companies for its own account and for the accounts of its customers and, accordingly, may at any time hold long or short positions and investments in such securities and financial instruments.

 

Under a potential interpretation of the SEC rules governing “going-private” transactions, each of the SLP Filing Persons, the SLS Filing Persons, Parent, Merger Sub and Mr. Shah may be deemed to be affiliates of the Company and required to express their beliefs as to the purposes and reasons for the Merger to the unaffiliated shareholders of the Company. The SLP Filing Persons, the SLS Filing Persons, Parent, Merger Sub and Mr. Shah are making the statements included in this section solely for the purpose of complying with the requirements of Rule 13e-3 and related rules under the Exchange Act. The views of the SLP Filing Persons, the SLS Filing Persons, Parent, Merger Sub and Mr. Shah should not be construed as a recommendation to any Company shareholder as to how that shareholder should vote on the Merger Proposal.

 

If the Merger is completed, the Company will become a wholly owned subsidiary of Parent. For Parent and Merger Sub, the purpose of the Merger is to effectuate the transactions contemplated by the Merger Agreement. For the SLP Filing Persons, the SLS Filing Persons and Mr. Shah, the purpose of the Merger is to allow the Sponsors and their respective affiliates to indirectly own equity interests in the Company and to bear the rewards and risks of such ownership after the shares of Common Stock cease to be publicly traded.

 

The SLP Filing Persons, the SLS Filing Persons and Mr. Shah believe that it is best for the Company to operate as a privately held entity in order to allow the Company greater operational flexibility and to focus on its long-term growth and continuing improvements to its business without the constraints and distractions caused by the public equity market’s valuation of its Common Stock. Moreover, the SLP Filing Persons, the SLS Filing Persons and Mr. Shah believe that the Company’s future business prospects can be improved through the active participation of Parent in the strategic direction of the Company.

 

The SLP Filing Persons and the SLS Filing Persons believe that structuring the transaction as a Merger transaction is preferable to other transaction structures because (a) it will enable Parent to acquire all of the outstanding Common Stock at the same time, (b) it represents an opportunity for the Company’s unaffiliated shareholders to receive fair value for their shares of Common Stock and (c) it allows the Rollover Investors and Mr. Shah to maintain (in each case, indirectly through Parent) an investment in the Company.

 

Under a potential interpretation of the SEC rules governing “going private” transactions, Mr. MacKenzie may be deemed to be an affiliate of the Company and required to express his belief as to the purposes and reasons for the Merger to the unaffiliated shareholders of the Company. Mr. MacKenzie is making the statements included in this section solely for the purpose of complying with the requirements of Rule 13e-3 and related rules under the Exchange Act. The views of Mr. MacKenzie should not be construed as a recommendation to any Company shareholder as to how that shareholder should vote on the Merger Proposal. Mr. MacKenzie believes that it is best for the Company to operate as a privately held entity in order to allow the Company greater operational flexibility and to focus on its long-term growth and continuing improvements to its business without the constraints and distractions caused by the public equity market’s valuation of its Common Stock. The Merger will also enable Mr. MacKenzie to benefit from any future earnings and growth of the Company, after its common stock ceases to be public traded, while at the same time providing him with an opportunity to receive cash for a portion of his existing investment in the Company. Mr. MacKenzie supports proceeding with the Merger at this time because he believes that the Merger is more favorable to the

unaffiliated shareholders of the Company than any other alternative reasonably available to the Company and its shareholders, including remaining as a standalone public company.

 

Under a potential interpretation SEC rules governing “going-private” transactions, each of the SLP Filing Persons, the SLS Filing Persons, Parent and Merger Sub may be deemed to be affiliates of the Company and required to express their beliefs as to the fairness of the Merger to the unaffiliated shareholders of the Company. Parent, Merger Sub, the SLP Filing Persons and the SLS Filing Persons are making the statements included in this section solely for the purpose of complying with the requirements of Rule 13e-3 and related rules under the Exchange Act. The views of Parent, Merger Sub, the SLP Filing Persons and the SLS Filing Persons should not be construed as a recommendation to any Company shareholder as to how that shareholder should vote on the Merger Proposal.

 

Parent and Merger Sub attempted to negotiate the terms of a transaction that would be most favorable to them, and not to the shareholders of the Company, and, accordingly, did not negotiate the Merger Agreement with a goal of obtaining terms that were fair to such shareholders. Neither Parent, Merger Sub, the SLP Filing Persons nor the SLS Filing Persons believes that it has or had any fiduciary duty to the Company or its shareholders, including with respect to the Merger and its terms.

 

None of Parent, Merger Sub, the SLP Filing Persons or the SLS Filing Persons participated in the deliberation process of our Special Committee and our Board of Directors, or in the conclusions of our Special Committee and our Board of Directors, as to the substantive and procedural fairness of the Merger to the unaffiliated shareholders of the Company, nor did they undertake any independent evaluation of the fairness of the Merger or engage a financial advisor for such purpose. Nevertheless, they believe that the proposed Merger is substantively and procedurally fair to the unaffiliated shareholders on the basis of the factors discussed below. Parent, Merger Sub, the SLP Filing Persons and the SLS Filing Persons believe that the proposed Merger is substantively fair to the unaffiliated shareholders based on the factors described in this proxy statement in the section entitled “Special Factors — Reasons for the Merger; Recommendation of Our Board of Directors and Special Committee” and on the following factors:

 

 

 

 

 

Parent, Merger Sub, the SLP Filing Persons and the SLS Filing Persons believe that the proposed Merger is procedurally fair to the unaffiliated shareholders based on the factors described in this proxy statement in the section entitled “Special Factors — Reasons for the Merger; Recommendation of Our Board of Directors and Special Committee” and on the following factors:

 

 

 

Parent, Merger Sub, the SLP Filing Persons and the SLS Filing Persons did not consider the Company’s net book value, which is an accounting concept, to be a factor in determining the substantive fairness of the transaction to the unaffiliated shareholders because they believed that net book value is not a material indicator of the value of the Company’s equity but rather an indicator of historical costs. Parent, Merger Sub, the SLP Filing Persons and the SLS Filing Persons also did not consider the liquidation value of the Company’s assets as indicative of the Company’s value primarily because of their belief that the liquidation value would be significantly lower than the Company’s value as an ongoing business and that, due to the fact that the Company is being sold as an ongoing business, the liquidation value is irrelevant to a determination as to whether the Merger is fair to the unaffiliated shareholders. Parent, Merger Sub, the SLP Filing Persons and the SLS Filing Persons did not establish a pre-merger going concern value for the Company’s equity as a public company for the purposes of determining the fairness of the Merger Consideration to the unaffiliated shareholders because, following the Merger, the Company will have a significantly different capital structure, which will result in different opportunities and risks for the business as a more highly leveraged private company. In making their determination as to the substantive fairness of the Merger to the unaffiliated shareholders, Parent, Merger Sub, the SLP Filing Persons and the SLS Filing Persons were not aware of any firm offers during the prior two years by any person for the merger or consolidation of the Company with another company, the sale or transfer of all or substantially all of the Company’s assets or a purchase of the Company’s assets that would enable the holder to exercise control of the Company.

 

The foregoing discussion of the information and factors considered by Parent, Merger Sub, the SLP Filing Persons and the SLS Filing Persons in connection with the fairness of the Merger is not intended to be exhaustive but is believed to include all material factors considered by Parent, Merger Sub, the SLP Filing Persons and the SLS Filing Persons. Parent, Merger Sub, the SLP Filing Persons and the SLS Filing Persons did not find it practicable to assign, and did not, assign or otherwise attach, relative weights to the individual factors in reaching their position as to the fairness of the Merger. Rather, their fairness determinations were made after consideration of all of the foregoing factors as a whole. Parent, Merger Sub, the SLP Filing Persons and the SLS Filing Persons believe the foregoing factors provide a reasonable basis for their belief that the Merger is substantively and procedurally fair to the unaffiliated shareholders.

 

Under a potential interpretation of the SEC rules governing “going-private” transactions, Mr. Shah may be deemed to be an affiliate of the Company and required to express his beliefs as to the fairness of the Merger to the unaffiliated shareholders of the Company. Mr. Shah is making the statements included in this section solely for the purpose of complying with the requirements of Rule 13e-3 and related rules under the Exchange Act. The views of Mr. Shah should not be construed as a recommendation to any Company shareholder as to how that shareholder should vote on the Merger Proposal.

As described below, Mr. Shah believes that the Merger is fair to such shareholders on the basis of the factors described under “Special Factors  — Position of the SLP Filing Persons, the SLS Filings Persons, Parent and Merger Sub Regarding the Fairness of the Merger.” Mr. Shah was not a party to nor did he participate in the negotiation of the Merger Agreement for the Company. Mr. Shah did not participate in the deliberations of the Special Committee regarding the Merger. Mr. Shah did not participate in the deliberations of the Special Committee or the Board of Directors regarding the Merger. He also did not receive advice from the Company’s legal or financial advisor as to the fairness of the Merger.

 

The shareholders of the Company (other than Parent and its affiliates) were represented by the Special Committee, which negotiated the terms and conditions of the Merger Agreement on their behalf, with the assistance of the Special Committee’s financial and legal advisors. Accordingly, Mr. Shah has not performed, or engaged a financial advisor to perform, any independent valuation or other analysis for the purpose of assessing the fairness of the Merger to such shareholders. Mr. Shah believes, however, that the Merger is substantively and procedurally fair to the unaffiliated shareholders of the Company based upon substantially the same factors considered by the SLP Filing Persons and the SLS Filing Persons with respect to the substantive and procedural fairness of the proposed Merger to such shareholders. See “Special Factors — Positions of the SLP Filing Persons, the SLS Filing Persons, Parent and Merger Sub Regarding the Fairness of the Merger.” Mr. Shah also agrees with the analyses, determinations and conclusions of the Special Committee described under “Special Factors — Reasons for the Merger; Recommendation of Our Board of Directors and Special Committee ,” based on the reasonableness of these analyses, determinations and conclusions.

 

While Mr. Shah is the Chairman of our Board of Directors, because of his participation in the transaction as described under the section captioned “Special Factors — Interests of the Company’s Directors and Executive Officers in the Merger ,” he did not serve on the Special Committee, nor did he participate in, or vote in connection with, the Special Committee’s evaluation of the Merger Agreement and the Merger or of our Board of Directors’ approval of the Merger Agreement and the Merger. For these reasons, Mr. Shah does not believe that his interests in the Merger influenced the decision of the Special Committee or the Board of Directors with respect to the Merger Agreement or the Merger.

 

The foregoing discussion of the information and factors considered by Mr. Shah in connection with the fairness of the Merger is not intended to be exhaustive but is believed to include all material factors considered by Mr. Shah. Mr. Shah did not find it practicable to assign, and did not, assign or otherwise attach, relative weights to the individual factors in reaching his position as to the fairness of the Merger. Rather, his fairness determinations were made after consideration of all of the foregoing factors as a whole. Mr. Shah believes that the foregoing factors provide a reasonable basis for the belief that the Merger is substantively and procedurally fair to the unaffiliated shareholders.

 

Under a potential interpretation of the SEC rules governing “going private” transactions, Mr. MacKenzie may be deemed our affiliate and required to express his belief as to the fairness of the Merger to the unaffiliated shareholders of the Company. Mr. MacKenzie is making the statements included in this subsection solely for the purposes of complying with Rule 13e-3 and related rules under the Exchange Act. While Mr. MacKenzie has not assigned specific relative weights to the factors considered by him (as described below), he believes that the factors considered provide a reasonable basis for his belief that the Merger is fair to our unaffiliated shareholders. However, his views as to fairness of the proposed Merger should not be construed as a recommendation to any of our shareholders on how such shareholders should vote on the Merger Proposal. Mr. MacKenzie does not make any recommendation as to how our shareholders should vote their shares. Mr. MacKenzie has interests in the proposed Merger that are both the same as our unaffiliated shareholders by virtue of the receipt of the Merger Consideration for a portion of his Common Stock, vested stock options and restricted stock units, following completion of the Merger and different from, and in addition to, those of our unaffiliated shareholders by virtue of his contribution to Parent of a portion of his Common Stock, vested stock options and vested restricted stock units and the replacement of his unvested stock options and unvested performance-based restricted stock units with common stock, stock options and time-based

restricted stock units of Parent. These interests are disclosed under “Special Factors — Interests of the Company’s Directors and Executive Officers in the Merger.”

 

Mr. MacKenzie has not performed, or engaged a financial advisor to perform, any valuation or other analysis to assess the fairness of the Merger. Mr. MacKenzie was not a member of the Special Committee and did not participate in the deliberations of the Special Committee as to the fairness of the Merger. He also did not receive advice from the Special Committee’s legal advisor or the financial advisor to the Special Committee with respect to the fairness of the Merger. However, in making his determination that the Merger is fair to our unaffiliated shareholders, Mr. MacKenzie generally considered many of the same positive, adverse and other factors considered by the Special Committee in making their determination to recommend the Merger Proposal, including, among other factors considered by Mr. MacKenzie, the analysis and resulting conclusions of the Special Committee discussed in this proxy statement in the section entitled “Special Factors — Reasons for the Merger; Recommendation of Our Board of Directors and Special Committee” ). Mr. MacKenzie also agrees that the analyses, determinations and conclusions of the Special Committee is reasonable based on the analyses presented to the Special Committee.

 

Mr. MacKenzie also believes that the proposed Merger is substantively fair to the unaffiliated shareholders, based on the following factors:

 

 

 

Mr. MacKenzie believes that the proposed Merger is procedurally fair to the unaffiliated shareholders, based on the following factors:

 

 

 

Mr. MacKenzie also considered potential negative factors related to the substantive and procedural fairness of the proposed Merger, including:

 

 

See “Special Factors — Reasons for the Merger; Recommendations of the Special Committee and Our Board of Directors.”

 

In addition, Mr. MacKenzie considered the fact that, although he was not entitled to rely on it, the Special Committee received an opinion from the Special Committee’s independent financial advisor, Barclays, to the effect that, as of the date of the opinion and subject to the various assumptions and limitations set forth therein, the consideration to be offered to the unaffiliated shareholders in the Merger was fair, from a financial point of view, to such shareholders. See “Special Factors — Opinion of the Special Committee’s Financial Advisor.”

 

Although Mr. MacKenzie, is an officer and director of the Company, he was not a member of the Special Committee nor did he participate in, or vote in connection with, the Special Committee’s evaluation of the Merger Agreement and the Merger. As a result, he does not believe that his interests in the Merger influenced the decision of the Special Committee in any way with respect to recommending the approval of the Merger Proposal.

 

The acquisition of the Company is being effected through the Merger because, in the opinion of us and each of Merger Sub and Parent, a Merger was the most appropriate structure to accomplish the transaction.

If the Merger Proposal is approved by the affirmative vote of the holders of at least two third of the shares of our Common Stock attending a duly convened shareholders meeting (in person or by proxy) voting by poll, and the other conditions to the closing of the Merger are satisfied or waived, the Merger will be consummated.

 

The consummation of the Merger would have the following effects:

 

 

 

 

 

If the Merger is completed, unaffiliated shareholders of the Company will have no interest in the Company’s net book value or net earnings. The table below sets forth the direct and indirect interests in the Company’s net book value and net earnings of Mr. MacKenzie, Mr. Shah, the SLP Filing Persons and the SLS Filing Persons prior to and immediately after the Merger, based upon the net book value of the Company at February 25, 2011, and the net income of the Company for the fiscal year ended August 27, 2010.

 

 

 

 

If the Merger Proposal is not approved by our shareholders, or if the Merger is not completed for any other reason, our shareholders will not receive any payment for their Common Stock pursuant to the Merger Agreement. Instead, we will remain as a public company and our Common Stock will continue to be registered under the Exchange Act and listed and traded on The NASDAQ Global Select Market. In addition, if the Merger is not completed, we expect that our management will operate our business in a manner similar to that in which it is being operated today and that our shareholders will continue to be subject to the same risks and opportunities to which they currently are subject, including, among other things, the nature of the industry on which the Company’s business largely depends, and general industry, economic, regulatory and market conditions.

 

If the Merger is not consummated, there can be no assurance as to the effect of these risks and opportunities on the future value of your shares of our Common Stock. In the event the Merger is not completed, our Board of Directors will continue to evaluate and review our business operations, prospects and capitalization, make such changes as are deemed appropriate and seek to identify acquisitions, joint ventures or strategic alternatives to enhance shareholder value. If the Merger Proposal is not approved by our shareholders, or if the Merger is not consummated for any other reason, there can be no assurance that any other transaction acceptable to us will be offered or that our business, prospects or results of operations will not be adversely impacted.

 

Under specified circumstances, we may be required to pay Parent or its designees a termination fee and reimburse Parent for certain of its out-of-pocket expenses or Parent may be required to pay us a termination fee. See “The Merger Agreement — Termination Fees and Reimbursement of Expenses.”

 

It is expected that, upon consummation of the Merger, the operations of the Company will be conducted substantially as they currently are being conducted, except that we will cease to have publicly traded equity securities and will instead be a wholly owned subsidiary of Parent. Parent has advised the Company that, other than as described in this proxy statement, it does not have any current intentions, plans or proposals to cause us to engage in any of the following:

 

 

We expect, however, that both before and following consummation of the Merger, the management and/or Board of Directors of the surviving company will continue to assess our assets, corporate and capital structure, capitalization, operations, business, properties and personnel to determine what changes, if any, would be desirable following the Merger to enhance the business and operations of the surviving company and may cause the surviving company to engage in the types of transactions set forth above if the management and/or Board of Directors of the surviving company decides that such transactions are in the best interest of the surviving company upon such review. The surviving company expressly reserves the right to make any changes it deems appropriate in light of such evaluation and review or in light of future developments.

 

We do not, as a matter of course, publicly disclose financial projections as to future financial performance, earnings or other results and are especially cautious of making financial forecasts for extended periods because of the unpredictability of the underlying assumptions and estimates. However, in connection with the evaluation of a possible transaction involving us, we provided the U.S. Sponsors and the financing sources of Parent and Merger Sub, other potential acquiring persons, who attended management presentations, our Board of Directors, the Special Committee and the Special Committee’s advisors certain non-public financial forecasts that were prepared by our management and not for public disclosure.

 

Summaries of these financial projections are being included in this document not to influence your decision whether to vote for or against the approval of the Merger Proposal, but because these financial forecasts were made available to the U.S. Sponsors, the financing sources of Parent and Merger Sub and the other potential acquiring persons who attended management presentations , our Board of Directors, the Special Committee and the Special Committee’s advisors. The inclusion of this information should not be regarded as an indication that our Board of Directors, the Special Committee, the Special Committee’s advisors or any other person considered, or now considers, such financial projections to be material or to be a reliable prediction of actual future results. Our management’s internal financial forecasts, upon which the financial projections were based, are subjective in many respects. There can be no assurance that these financial projections will be realized or that actual results will not be significantly higher or lower than forecasted. The financial forecasts cover multiple years and such information by its nature becomes less reliable with each successive year. As a result, the inclusion of the financial projections in this proxy statement should not be relied on as necessarily predictive of actual future events.

 

In addition, the financial projections were prepared solely for internal use in assessing strategic direction and other management decisions and to provide performance targets for management (including for purposes of performance based compensation), and not with a view toward public disclosure or toward complying with generally accepted accounting principles which we refer to as GAAP, the published guidelines of the SEC regarding projections and the use of non-GAAP measures or the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of prospective financial information. The financial projections included below were prepared by, and are the responsibility of, our management. Neither our independent public accounting firm, nor any other independent public accounting firm, have compiled, examined or performed any procedures with respect to the financial forecasts contained herein, nor have they expressed any opinion or any other form of assurance on such information or its achievability.

 

These financial projections were based on numerous variables and assumptions that are inherently uncertain and may be beyond our control. Important factors that may affect actual results and cause these financial projections to not be achieved include, but are not limited to, risks and uncertainties relating to our business (including our ability to achieve strategic goals, objectives and targets over the applicable periods), industry performance, general business and economic conditions and other factors described under “Cautionary Statement Concerning Forward-Looking Information” beginning on page [ • ]. In addition, the projections do not reflect revised prospects for our business, changes in general business or economic conditions, or any other transaction or event that has occurred or that may occur and that was not anticipated at the time the financial projections were prepared in February and March 2011. Accordingly, there can be no assurance that these financial projections will be realized or that our future financial results will not materially vary from these financial projections.

 

No one has made or makes any representation to any shareholder or anyone else regarding the information included in the financial projections set forth below. Readers of this proxy statement are cautioned not to rely on the projected financial information. Except to the extent required by applicable federal securities laws, we have not updated and do not intend to update, or otherwise revise the financial projections to reflect circumstances existing after the date when made or to reflect the occurrence of future events, even in the event that any or all of the assumptions are shown to be in error. We have made no representation to Parent, Merger Sub or any other person in the Merger Agreement or otherwise, concerning these financial projections.

The financial projections are forward-looking statements. For information on factors that may cause our future financial results to materially vary, see “Cautionary Statement Concerning Forward-Looking Information” beginning on page [ • ].

 

In compiling the financial projections, our management took into account historical performance, combined with estimates regarding revenues, EBITDA (earnings before interest, taxes, depreciation and amortization), EBIT (earnings before interest and tax) and capital expenditures.

 

The following is a summary of the financial forecasts prepared by management of the Company and given to the Special Committee and its advisors:

 

Board Case Projections(1)

 

 

 

 

Reviewed Case Projections(1)

 

 

 

 

We estimate that the total amount of funds necessary to complete the Merger and the related transactions and financings, including the prepayment of the Company’s Senior Secured Floating Rate Notes due 2012 and payment of related fees and expenses, will be approximately $700 million.

 

We expect this amount to be funded through a combination of the following:

 

 

 

Parent has obtained the equity and debt financing commitments described below. The funding under those commitments is subject to conditions, including conditions that do not relate directly to the Merger Agreement. Parent has represented to us that it has sufficient committed equity and debt financing to complete the transaction. Although obtaining the equity or debt financing is not a condition to the completion of the Merger, the failure of Parent and Merger Sub to obtain sufficient financing would likely result in the failure of the Merger to be completed. In that case, Parent may be obligated to pay the Company a fee of $58.1 million as described under “Special Factors — Termination Fees” beginning on page [ • ]. Payment of such fee is guaranteed by the as described under “Special Factors — Limited Guarantees” beginning on page [ • ].

 

Equity Financing

 

Parent has entered into a letter agreement, which we refer to as the equity commitment letter, with the U.S. Sponsors, dated as of April 26, 2011, pursuant to which the U.S. Sponsors have committed, severally but not jointly, upon the terms and subject to the conditions set forth in the equity commitment letter, to make capital contributions to Parent for an aggregate of up to $381 million. The U.S. Sponsors may assign their equity commitment to other investors, although no assignment of the equity commitment to other investors will affect the U.S. Sponsors’ commitment to make capital contributions pursuant to the equity commitment letter. The Cayman Sponsors are expected to fund all or a portion of the equity financing of Parent at the closing of the Merger and, accordingly, the Cayman Sponsors will own all or a part of the share capital of Parent (other than share capital issued to the Rollover Investors and Mr. Shah (including his estate planning entities over which he has management and investment powers) in connection with the rollover financing).

 

The U.S. Sponsors’ equity commitments are generally subject to the satisfaction of the conditions to Parent and Merger Sub’s obligations to effect the consummation of the Merger as set forth in the Merger Agreement and the substantially concurrent receipt of the proceeds of the debt financing described below. The equity financing contemplated by the equity commitment letter will terminate upon the earliest to occur of (i) the termination of the Merger Agreement in accordance with its terms, (ii) the Company or any of its affiliates asserting a claim against any guarantor in connection with the equity commitment letter, the Merger Agreement or any of the limited guarantees referred to below under “Special Factors — Limited Guarantees” beginning on page [ • ] or (iii) payment from any guarantor under its respective limited guarantee.

 

Rollover Financing

 

On April 25, 2011, Mr. MacKenzie and certain other Rollover Investors entered into agreements with Parent pursuant to which they collectively committed to invest an aggregate amount of $11,734,937 in Parent, which includes the following:

 

 

 

See “Interests of Company’s Directors and Executive Officers in the Merger — Equity Rollover Commitments” for further information.

 

It is our expectation that, concurrently with the closing of the Merger, Mr. Shah (and his estate planning entities over which he has management and investment powers) will contribute his and his estate planning entities’ shares of Common Stock to Parent in exchange for equity securities of Parent on substantially similar terms as the Rollover Investors.

 

Debt Financing

 

In connection with the execution and delivery of the Merger Agreement, Merger Sub obtained a debt commitment letter, dated as of April 26, 2011, from the lenders, to provide, severally but not jointly, upon the terms and subject to the conditions set forth in the debt commitment letter, in the aggregate up to $350 million in debt financing (not all of which is expected to be drawn at the closing of the Merger) to one or more subsidiaries of the Company, consisting of (i) up to a $300 million senior secured first-lien term loan facility and (ii) up to a $50 million senior secured first-lien “first-out” revolving credit facility.

 

The facilities contemplated by the debt financing commitment letter are conditioned on the consummation of the Merger as well as other customary conditions, including, but not limited to:

 

 

If any portion of the debt financing becomes unavailable on the terms and conditions contemplated by the debt financing commitment, Parent is required to promptly notify the Company and use its reasonable best efforts to arrange to obtain alternative financing from alternative debt financing sources in an amount sufficient to consummate the Merger on terms and conditions no less favorable to Parent and Merger Sub than those set forth in the debt commitment letter described above. As of the date of this proxy statement, no alternative financing arrangements or alternative financing plans have been made in the event the debt financing described above is not available as anticipated. The documentation governing the senior secured facilities has not been finalized and, accordingly, its actual terms may differ from those described in this proxy statement.

 

Although the debt financing described in this proxy statement is not subject to the lenders’ satisfaction with their due diligence or to a “market out,” such financing may not be considered assured. The failure of Parent and Merger Sub to obtain sufficient financing would likely result in the failure of the Merger to be completed. In that case, Parent may be obligated to pay to the Company a termination fee of $58.1 million as

described under “The Merger Agreement — Termination Fees” beginning on page [ • ]. That obligation is guaranteed by the guarantors, as described under “Special Factors — Limited Guarantees” .

 

Concurrently with the execution of the Merger Agreement, pursuant to limited guarantees delivered by each of the U.S. Sponsors in favor of the Company, each of the U.S. Sponsors, severally and not jointly, has unconditionally and irrevocably guaranteed (a) the due and punctual payment, observance, performance and discharge of their respective portions of the payment obligations of Parent with respect to the $58.1 million termination fee payable under certain circumstances by Parent, subject to the limitations set forth in the limited guarantees and the Merger Agreement, as described under “The Merger Agreement —  Termination Fees” beginning on page [ • ] and (b) the expense reimbursement obligations of Parent in connection with the costs and expenses incurred in connection with any suit to enforce the payment of the $58.1 million termination fee.

 

Each of the limited guarantees will terminate upon the earliest to occur of:

 

 

You should be aware that certain of our directors and executive officers may have interests in the Merger that may be different from, or in addition to, your interests as a shareholder and that may present actual or potential conflicts of interest. These interests include the following:

 

 

 

Absent a termination of employment of any executive officers, in the event the closing of the Merger occurs, the Compensation Committee of our Board of Directors will measure the level of performance achieved by the Company from the beginning of the applicable performance period up to immediately prior to the closing of the Merger with respect to the performance-based restricted stock units. The number of shares of Common Stock underlying the performance-based restricted stock units that will be awarded will be determined by multiplying the number of underlying shares of Common Stock granted in the performance-based restricted stock units, by the performance percentage achieved. A prorated portion of the restricted stock units earned at that level of achievement will immediately vest, prorated based on the portion of the original performance period that has elapsed through the closing date of the Merger. The remaining performance adjusted unvested performance-based restricted stock units will be converted into time-based restricted stock units (the “Remaining Restricted Stock Units”) pursuant to the severance and change of control agreements. Pursuant to the change of control agreements, the Remaining Restricted Stock Units were to vest following the closing of the Merger in equal monthly installments over the remaining portion of the original performance period, subject to continued service. However, each of our named executive officers has agreed that, following the closing of the Merger, the Remaining Restricted Stock Units, will vest in equal quarterly installments (rather than monthly installments) during the remaining portion of the original performance period and be settled in ordinary shares of Parent. For more information regarding payments due to certain of our executive officers in the event that a closing of the Merger occurs, see the section of this proxy statement entitled “Special Factors — Interests of the Company’s Directors and Executive Officers in the Merger — Change of Control Payments” beginning on page [ • ].

 

The Special Committee and our Board of Directors were aware of these interests and considered that these interests may be different from, or in addition to, the interests of our shareholders generally, among other matters, in making their respective determinations regarding the Merger Agreement and the transactions contemplated thereby, including the Merger.

 

Interests of Mr. Shah

 

The chairman of our Board of Directors, Mr. Shah, is the founder and Managing Director of Silver Lake Sumeru, a role he has held since 2007. For more information regarding Mr. Shah, see the section of this proxy statement entitled “Special Factors — Business and Background of Certain Persons Related to the Company — Directors” beginning on page [ • ].

 

Mr. Shah holds a certain amount of his shares in the Company through Krishnan-Shah Family Partners, L.P. and the Ajay B. Shah and Lata K. Shah Trust (collectively, the “Shah Entities”). Mr. Shah is the general partner of Krishnan-Shah Family Partners, L.P. and the trustee of the Ajay B. Shah and Lata K. Shah Trust. Both of the Shah Entities were formed for the purpose of personal investing by Mr. Shah and his family.

Before the closing of the Merger we expect that Mr. Shah and the Shah Entities will enter into an agreement pursuant to which Mr. Shah and the Shah Entities will agree to contribute all of his and the Shah Entities’ shares of Common Stock, restricted stock units and options to purchase Common Stock to Parent in exchange for equity securities of Parent on substantially similar terms as the Rollover Investors.

 

Interests of Mr. Patel

 

Mr. Patel, a member of the Company’s Board of Directors, is an investor in Silver Lake Sumeru Fund, L.P. through his capacity as the general partner of Patel Family Partners, L.P. Patel Family Partners, L.P. is a limited partner of Silver Lake Sumeru Fund, L.P. For more information regarding Mr. Patel, see the section of this proxy statement entitled “Special Factors — Business and Background of Certain Persons Related to the Company — Directors” beginning on page [ • ].

 

Equity Rollover Commitments

 

Mr. Iain MacKenzie, our President and Chief Executive Officer, as well as certain other Rollover Investors, have entered into agreements with Parent pursuant to which they have collectively committed to invest an aggregate amount of $11,734,937 in Parent. First, Mr. MacKenzie and such other Rollover Investors have committed to invest, immediately prior to the consummation of the Merger, an aggregate amount of $7,633,349 in equity securities of Parent. Mr. MacKenzie and such other Rollover Investors may satisfy this investment commitment by the contribution of shares of Common Stock, vested Company stock options and/or cash. To the extent a Rollover Investor satisfies such investment commitment using cash by contributing the cash proceeds from the cash-out of time-based restricted stock units in the Merger, the amount of such Rollover Investor’s total investment commitment will be reduced by the amount of any applicable withholding taxes attributable to the cash-out of such time-based restricted stock units. Second, Mr. MacKenzie and such other Rollover Investors have committed to purchase additional equity securities of Parent in an amount equal to the after-tax proceeds from the cash-out of their performance-based restricted stock units that vest upon the Merger. The pre-tax amount of such cash-out proceeds totals $4,101,588, but the amount invested is anticipated to be lower due to applicable Federal and state taxes for U.S. Rollover Investors. For purposes of determining the investment amount, the tax rates will be assumed to be the highest marginal Federal and state income tax rates applicable taking into account the deductibility of state taxes for Federal tax calculation purposes. In connection with the consummation of the Merger, this group will also receive, as applicable: (i) a cash-out of their time-based restricted stock units, their vested Company stock options and their performance-based restricted stock units that vest in connection with the Merger (subject to the obligation by each such Rollover Investor to invest the after-tax proceeds of the cash-out of such performance-based restricted stock units in equity securities of Parent pursuant to the rollover commitments), (ii) options to acquire ordinary shares of Parent in exchange for each unvested Company stock option, (iii) the exchange of performance-vesting restricted stock units of the Company that remain unvested in the Merger into time-vesting restricted stock units of Parent, which units will settle in equity securities of Parent upon vesting, (iv) an opportunity for additional options to acquire ordinary shares of Parent under a new option plan expected to be put in place by Parent following the Merger, (v) an opportunity to purchase additional ordinary shares of Parent, and (vi) continued indemnification and insurance coverage, severance and change of control payment rights by the Company after the Merger.

The currently committed investments by the Rollover Investors as of the date of the mailing of this proxy statement, including any and all commitments by executive officers of the Company, are as follows:

 

 

 

 

New Stock Option Plan

 

It is expected that upon or after the closing of the Merger, the Company will establish an equity-based compensation plan and will grant equity awards to our executive officers and certain other employees.

 

Continuation of Service of Executive Officers

 

After the closing of the Merger, it is expected that all executive officers of the Company will continue to serve in substantially similar capacities.

 

Treatment of Stock Options

 

As described in “ The Merger Agreement — Consideration to be Received Pursuant to the Merger” beginning on page [ • ], the Merger Agreement provides that, except as otherwise agreed between Parent and a holder of a Company stock option, each vested stock option (including those options that have vesting accelerated) and each unvested stock option held by a nonemployee director of the Company granted under any Company equity compensation plan, that is outstanding and unexercised immediately prior to the effective time of the Merger will be cancelled and exchanged for a cash payment equal to the product of (i) the excess (if any) of the Merger Consideration over the exercise price of such stock option and (ii) the number of shares of Common Stock subject to such stock option, without interest less applicable withholding taxes. However, as described in “ The Merger Agreement — Consideration to be Received Pursuant to the Merger” beginning on page [ • ], except as otherwise agreed between Parent and a holder of an unvested Company stock option, each unvested Company stock option (other than the unvested options held by a nonemployee director of the Company) will be replaced with an equivalent option to acquire ordinary shares of Parent.

The table below provides information as of May 20, 2011 for each of our non-employee directors and Named Executive Officers who currently hold options to purchase our Common Stock: (a) the aggregate number of shares of Common Stock subject to vested stock options; (b) the value of such vested stock options on a pre-tax basis, calculated by multiplying (i) the excess, if any, of the Merger Consideration over the respective per share exercise prices of those stock options by (ii) the number of shares of Common Stock subject to those stock options; (c) the aggregate number of unvested stock options that will vest on the effective time of the Merger; (d) the value of those unvested stock options on a pre-tax basis, calculated by multiplying (i) the excess, if any, of the Merger Consideration over the respective per share exercise prices of those stock options by (ii) the number of share of Common Stock subject to those stock options; (e) the aggregate number of shares of Common Stock subject to vested stock options and unvested stock options that will vest on the effective time of the Merger; and (f) the aggregate value of all such vested stock options and unvested stock options that will vest on the effective time of the Merger on a pre-tax basis, calculated by multiplying (i) the excess, if any, of the Merger Consideration over the respective per share exercise prices of those stock options by (ii) the number of shares of Common Stock subject to those stock options. The information in the table assumes that all currently outstanding options will remain outstanding immediately prior to the effective time of the Merger, and does not reflect any of the rollover transactions expected to be made by the Rollover Investors.