STOCK OPTION AGREEMENT
This Stock Option Agreement (this "Agreement") is made and entered into as
of November 22, 1999, between The DII Group, Inc., a Delaware corporation
("Company"), and Flextronics International Ltd., a Singapore company ("Parent").
Capitalized terms used in this Agreement but not defined herein shall have the
meanings ascribed to such terms in the Merger Agreement (as defined below).
RECITALS
A. Concurrently with the execution and delivery of this Agreement, Company,
Parent and Slalom Acquisition Corp., a Delaware corporation and a wholly owned
subsidiary of Parent ("Merger Sub"), are entering into an Agreement and Plan of
Merger (the "Merger Agreement"), that provides, among other things, upon the
terms and subject to the conditions thereof, for Company and Parent to enter
into a business combination transaction (the "Merger").
B. As a condition to Parent's willingness to enter into the Merger
Agreement, Parent has required that Company agree, and Company has so agreed, to
grant to Parent an option to acquire shares of Company Common Stock ("Company
Shares"), upon the terms and subject to the conditions set forth herein.
In consideration of the foregoing and of the mutual covenants and
agreements set forth herein and in the Merger Agreement and for other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties agree as follows:
1. Grant of Option. Company hereby grants to Parent an irrevocable option
(the "Option"), exercisable following the occurrence of an Exercise Event (as
defined in Section 2(a)), to acquire up to a number of Company Shares equal to
19.9% of the shares of Company Common Stock issued and outstanding as of the
date, if any, upon which an Exercise Notice (as defined in Section 2(b) below)
shall have been delivered (the "Option Shares"), in the manner set forth below
by paying cash at a price of $65.406 per share (the "Exercise Price"). The
Option shall not be transferable except to the Company pursuant to Section 8
below.
2. Exercise of Option; Maximum Proceeds
(a) For all purposes of this Agreement, an "Exercise Event" shall mean any
of (i) the occurrence of a Company Triggering Event (as such term is defined in
the Merger Agreement) other than any event under clause (vii) of the definition
of Company Triggering Event, (ii) a public announcement of an Option Acquisition
Proposal (as defined below) shall have been made prior to the date the Merger
Agreement is terminated pursuant to the terms thereof (the "Merger Termination
Date") and the occurrence of one or more of the following on or after the date
of the announcement of such Option Acquisition Proposal: (1) the requisite vote
of the stockholders of Company in favor of the Merger Agreement and the Merger
shall not have been obtained at the Company Stockholders' Meeting (as such term
is defined in the Merger Agreement); (2) a tender offer or exchange offer for
15% or more of the outstanding shares of Company Common Stock shall have been
commenced (other than by Parent or an affiliate of Parent); (3) for any reason
Company shall have failed to call and hold the Company
Stockholders' Meeting by the Outside Date (as defined in the Merger Agreement);
or (4) Company shall have failed to take all actions necessary to hold the
Company Stockholders' Meeting as promptly as practicable, and in any event (to
the extent permissible under applicable law) within 45 days after the
declaration of effectiveness of the Registration Statement, (iii) the
acquisition by any person (other than Parent) or "group" (as defined under
Section 13(d) of the Exchange Act and the rules and regulations thereunder) of
beneficial ownership of 25% or more of the total outstanding voting securities
of the Company or any of its subsidiaries, or (iv) the commencement of a
solicitation within the meaning of Rule 14a-1(l) by any person or entity other
than Parent or its Board of Directors (or any person or entity acting on behalf
of Parent or its Board of Directors) seeking to alter the composition of
Company's Board of Directors. For purposes of this Agreement, "Option
Acquisition Proposal" shall mean any offer or proposal (other than an offer or
proposal by Parent) relating to any transaction or series of related
transactions involving: (A) any purchase from Company or acquisition by any
person or "group" (as defined under Section 13(d) of the Exchange Act and the
rules and regulations thereunder) of more than a 10% interest in the total
outstanding voting securities of Company or any of its subsidiaries or any
tender offer or exchange offer that if consummated would result in any person or
"group" (as defined under Section 13(d) of the Exchange Act and the rules and
regulations thereunder) beneficially owning 10% or more of the total outstanding
voting securities of Company or any of its subsidiaries or any merger,
consolidation, business combination or similar transaction involving Company;
(B) any sale, lease, exchange, transfer, license, acquisition or disposition of
more than 10% of the assets of Company (other than sales of inventory in the
ordinary course of business); or (C) any liquidation or dissolution of Company.
(b) Parent may deliver to Company a written notice (an "Exercise Notice")
specifying that it wishes to exercise and close a purchase of Option Shares at
any time following the occurrence, prior to termination of the Option, of an
Exercise Event and specifying the total number of Option Shares it wishes to
acquire. Unless such Exercise Notice is withdrawn by Parent, the closing of a
purchase of Option Shares (a "Closing") specified in such Exercise Notice shall
take place at the principal offices of Company upon such date as may be
designated by Parent in writing.
(c) The Option shall terminate upon the earliest to occur of (i) the
Effective Time (as such term is defined in the Merger Agreement), (ii)
termination of the Merger Agreement other than pursuant to Section 7.1(b), (d),
(f) or (h) thereof, (iii) 14 months following the termination of the Merger
Agreement pursuant to Section 7.1(b), (d), (f) or (h), and (iv) 14 months
following the first occurrence of an Exercise Event; provided, however, that if
the Option is exercisable but cannot be exercised by reason of any applicable
government order or because the waiting period related to the issuance of the
Option Shares under the HSR Act shall not have expired or been terminated, or
because any other condition to closing has not been satisfied, then the Option
shall not terminate until the tenth business day after such impediment to
exercise shall have been removed or shall have become final and not subject to
appeal.
(d) If Parent at any time, whether before or after receipt of any Company
Termination Fee pursuant to Section 7.3(b) of the Merger Agreement, receives
proceeds in connection with any sales or other dispositions of this Option or
Option Shares (including on surrender of this Option to Company pursuant to
Section 8 hereof or by selling Option Shares to
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Company pursuant to Section 6(f) or Section 9 hereof), plus any dividends (or
equivalent distributions under Section 7(a) hereof) received by Parent declared
on Option Shares, less the Exercise Price multiplied by the number of Company
Shares purchased by Parent pursuant to the Option, which, taken together with
any Company Termination Fee paid or payable pursuant to Section 7.3(b) of the
Merger Agreement, exceeds three and one-half percent (3.5%) of the Company
Equity Value (as defined below), then all proceeds to Parent in excess of such
sum shall be promptly remitted in cash by Parent to Company. For the purposes of
this Agreement, "Company Equity Value" means the product of the average closing
price of Company Common Stock on the Nasdaq National Market over the five (5)
trading days prior to the Closing with respect to the first exercise by Parent
of the Option, and the sum of: (A) all shares of Company Common Stock that are
outstanding as of the close of business on the date immediately preceding the
Closing with respect to the first exercise by Parent of the Option; (B) all
shares of Company Common Stock issuable upon conversion of all shares of capital
stock that, at the time of the Closing with respect to the first exercise by
Parent of the Option, is convertible into shares of Company Common Stock; and
(C) all shares of Company Common Stock issuable upon conversion of all options
and warrants to acquire Company Common Stock that are outstanding, at the time
of the Closing with respect to the first exercise by Parent of the Option (other
than pursuant to this Agreement).
3. Conditions to Closing. The obligation of Company to issue Option Shares
to Parent hereunder is subject to the conditions that (a) any waiting period
under the HSR Act applicable to the issuance of the Option Shares hereunder
shall have expired or been terminated; (b) all material consents, approvals,
orders or authorizations of, or registrations, declarations or filings with, any
Governmental Entity, if any, required in connection with the issuance of the
Option Shares hereunder shall have been obtained or made, as the case may be;
and (c) no preliminary or permanent injunction or other order by any court of
competent jurisdiction prohibiting or otherwise restraining such issuance shall
be in effect. It is understood and agreed that at any time during which Parent
shall be entitled to deliver to Company an Exercise Notice, the parties will use
their respective reasonable efforts to satisfy all conditions to Closing, so
that a Closing may take place as promptly as practicable.
4. Closing. At any Closing, Company shall deliver to Parent a single
certificate in definitive form representing the number of Company Shares
designated by Parent in its Exercise Notice consistent with this Agreement, such
certificate to be registered in the name of Parent and to bear the legend set
forth in Section 9 hereof, against delivery of payment by Parent to the Company
of the aggregate purchase price for the Company Shares so designated and being
purchased by delivery of a certified check, bank check or wire transfer of
immediately available funds.
5. Representations and Warranties of Company. Company represents and
warrants to Parent that (a) Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
the corporate power and authority to enter into this Agreement and to carry out
its obligations hereunder; (b) the execution and delivery of this Agreement by
Company and consummation by Company of the transactions contemplated hereby have
been duly authorized by all necessary corporate action on the part of Company
and no other corporate proceedings on the part of Company are necessary to
authorize this Agreement
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or any of the transactions contemplated hereby; (c) this Agreement has been duly
executed and delivered by Company and constitutes a legal, valid and binding
obligation of Company and, assuming this Agreement constitutes a legal, valid
and binding obligation of Parent, is enforceable against Company in accordance
with its terms, except as enforceability may be limited by bankruptcy and other
similar laws affecting the rights of creditors generally and general principles
of equity; (d) except for any filings, authorizations, approvals or orders
required under the HSR Act and any required filings of under state securities,
or "blue sky" laws, Company has taken all necessary corporate and other action
to authorize and reserve for issuance and to permit it to issue upon exercise of
the Option, and at all times from the date hereof until the termination of the
Option will have reserved for issuance, a sufficient number of unissued Company
Shares for Parent to exercise the Option in full and will take all necessary
corporate or other action to authorize and reserve for issuance all additional
Company Shares or other securities which may be issuable pursuant to Section
7(a) upon exercise of the Option, all of which, upon their issuance and delivery
in accordance with the terms of this Agreement and payment therefor by Parent,
will be validly issued, fully paid and nonassessable; (e) upon delivery of the
Company Shares and any other securities to Parent upon exercise of the Option,
Parent will acquire such Company Shares or other securities free and clear of
all claims, liens, charges, encumbrances and security interests of any kind or
nature whatsoever, excluding those imposed by Parent; (f) the execution and
delivery of this Agreement by Company do not, and the performance of this
Agreement by the Company will not, (i) violate the Certificate of Incorporation
or Bylaws of the Company, (ii) conflict with or violate any law, rule,
regulation, judgment, decree or order applicable to the Company or any of its
subsidiaries or by which they or any of their respective properties is bound or
affected or (iii) result in any breach of or constitute a default (or an event
which with notice or lapse of time or both would become a default) under, or
give rise to any right of termination, amendment, acceleration or cancellation
of, or result in the creation of a material lien or encumbrance on any material
property or assets of Company or any of its subsidiaries pursuant to, any
material contract, agreement, instrument or obligation to which Company or any
of its subsidiaries is a party or by which Company or any of its subsidiaries or
any of their material property is bound or affected; and (g) the execution and
delivery of this Agreement by Company do not, and the performance of this
Agreement by Company will not, require any consent, approval, authorization or
permit of, or filing with, or notification to, any Governmental Entity, except
pursuant to applicable state securities or blue sky laws and the HSR Act or
applicable corresponding laws of any foreign jurisdiction.
6. Registration Rights
(a) Following the termination of the Merger Agreement, Parent (sometimes
referred to herein as the "Holder") may by written notice (a "Registration
Notice") to Company (the "Registrant") request the Registrant to register under
the Securities Act all or any part of the shares acquired by the Holder pursuant
to this Agreement (such shares requested to be registered the "Registrable
Securities") in order to permit the sale or other disposition of such shares
pursuant to a bona fide firm commitment underwritten public offering in which
the Holder and the underwriters shall effect as wide a distribution of such
Registrable Securities as is reasonably practicable (a "Permitted Offering");
provided, however, that any such Registration Notice must relate to a number of
shares equal to at least 2% of the outstanding shares of Common Stock of the
Registrant on a fully diluted basis and that any rights to require registration
hereunder shall
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terminate with respect to any shares that may be sold pursuant to Rule 144(k)
under the Securities Act or at such time as all of the Registrable Securities
may be sold in any three month period pursuant to Rule 144 under the Securities
Act.
(b) The Registrant shall use all reasonable efforts to effect, as promptly
as practicable, the registration under the Securities Act of the Registrable
Securities requested to be registered in the Registration Notice; provided,
however, that (i) the Holder shall not be entitled to more than an aggregate of
two effective registration statements hereunder, and provided further, that if
the Registrant withdraws a filed registration statement at the request of the
Holder (other than as the result of a material change in the Registrant's
business or the Holder's learning of new material information concerning the
Registrant), then such filing shall be deemed to have been an effective
registration for purposes of this clause (i), (ii) the Registrant will not be
required to file any such registration statement during any period of time (not
to exceed 45 days after a Registration Notice in the case of clause (A) below or
90 days after a Registration Notice in the case of clauses (B) and (C) below)
when (A) the Registrant is in possession of material non-public information
which it reasonably believes would be detrimental to be disclosed at such time
and such information would have to be disclosed if a registration statement were
filed at that time; (B) the Registrant is required under the Securities Act to
include audited financial statements for any period in such registration
statement and such financial statements are not yet available for inclusion in
such registration statement; or (C) the Registrant determines, in its reasonable
judgment, that such registration would interfere with any financing, acquisition
or other material transaction involving the Registrant and (iii) the Registrant
will not be required to maintain the effectiveness of any such registration
statement for a period greater than 90 days. If consummation of the sale of any
Registrable Securities pursuant to a registration hereunder does not occur
within 180 days after the filing with the SEC of the initial registration
statement therefor, the provisions of this Section 6 shall again be applicable
to any proposed registration. The Registrant shall use all reasonable efforts to
cause any Registrable Securities registered pursuant to this Section 6 to be
qualified for sale under the securities or blue sky laws of such jurisdictions
as the Holder may reasonably request and shall continue such registration or
qualification in effect in such jurisdictions until the Holder has sold or
otherwise disposed of all of the securities subject to the registration
statement; provided, however, that the Registrant shall not be required to
qualify to do business in, or consent to general service of process in, any
jurisdiction by reason of this provision.
(c) The registration rights set forth in this Section 6 are subject to the
condition that the Holder shall provide the Registrant with such information
with respect to the Holder's Registrable Securities, the plan for distribution
thereof, and such other information with respect to the Holder as, in the
reasonable judgment of counsel for the Registrant, is necessary to enable the
Registrant to include in a registration statement all material facts required to
be disclosed with respect to a registration thereunder, including the identity
of the Holder and the Holder's plan of distribution.
(d) A registration effected under this Section 6 shall be effected at the
Registrant's expense, except for underwriting discounts and commissions and the
fees and expenses of counsel to the Holder, and the Registrant shall use all
reasonable efforts to provide to the underwriters such documentation (including
certificates, opinions of counsel and "comfort"
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letters from auditors) as are customary in connection with underwritten public
offerings and as such underwriters may reasonably require. In connection with
any registration, the Holder and the Registrant agree to enter into an
underwriting agreement reasonably acceptable to each such party, in form and
substance customary for transactions of this type with the underwriters
participating in such offering.
(e) Indemnification
(i) The Registrant will indemnify the Holder, each of its directors
and officers and each person who controls the Holder within the meaning of
Section 15 of the Securities Act, and each underwriter of the Registrant's
securities, with respect to any registration, qualification or compliance
which has been effected pursuant to this Agreement, against all expenses,
claims, losses, damages or liabilities (or actions in respect thereof),
including any of the foregoing incurred in settlement of any litigation,
commenced or threatened, arising out of or based on any untrue statement
(or alleged untrue statement) of a material fact contained in any
registration statement, prospectus, offering circular or other document, or
any amendment or supplement thereto, incident to any such registration,
qualification or compliance, or based on any omission (or alleged omission)
to state therein a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances in which they
were made, not misleading, or any violation by the Registrant of any rule
or regulation promulgated under the Securities Act applicable to the
Registrant in connection with any such registration, qualification or
compliance, and the Registrant will reimburse the Holder and, each of its
directors and officers and each person who controls the Holder within the
meaning of Section 15 of the Securities Act, and each underwriter for any
legal and any other expenses reasonably incurred in connection with
investigating, preparing or defending any such claim, loss, damage,
liability or action; provided that the Registrant will not be liable in any
such case to the extent that any such claim, loss, damage, liability or
expense arises out of or is based on any untrue statement or omission or
alleged untrue statement or omission, made in reliance upon and in
conformity with written information furnished to the Registrant by the
Holder or director or officer or controlling person or underwriter seeking
indemnification.
(ii) The Holder will indemnify the Registrant, each of its directors
and officers and each underwriter of the Registrant's securities covered by
such registration statement and each person who controls the Registrant
within the meaning of Section 15 of the Securities Act, against all claims,
losses, damages and liabilities (or actions in respect thereof), including
any of the foregoing incurred in settlement of any litigation, commenced or
threatened, arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any such registration
statement, prospectus, offering circular or other document, or any omission
(or alleged omission) to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading,
or any violation by the Holder of any rule or regulation promulgated under
the Securities Act applicable to the Holder in connection with any such
registration, qualification or compliance, and will reimburse the
Registrant, such directors, officers or control persons or underwriters for
any legal or any other expenses reasonably incurred in connection with
investigating, preparing or defending any such claim, loss, damage,
liability or action, in each case to the extent, but only to the extent,
that such untrue statement (or alleged untrue statement) or omission (or
alleged omission) is made in such registration statement,
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prospectus, offering circular or other document in reliance upon and in
conformity with written information furnished to the Registrant by the
Holder expressly for use therein; provided that in no event shall any
indemnity under this Section 6(e) exceed the gross proceeds of the offering
received by the Holder.
(iii) Each party entitled to indemnification under this Section 6(e)
(the "Indemnified Party") shall give notice to the party required to
provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity
may be sought, and shall permit the Indemnifying Party to assume the
defense of any such claim or any litigation resulting therefrom, provided
that counsel for the Indemnifying Party, who shall conduct the defense of
such claim or litigation, shall be approved by the Indemnified Party (whose
approval shall not unreasonably be withheld), and the Indemnified Party may
participate in such defense at such party's expense; provided, however,
that the Indemnifying Party shall pay such expense if representation of the
Indemnified Party by counsel retained by the Indemnifying Party would be
inappropriate due to actual or potential differing interests between the
Indemnified Party and any other party represented by such counsel in such
proceeding, and provided further that the failure of any Indemnified Party
to give notice as provided herein shall not relieve the Indemnifying Party
of its obligations under this Section 6(e) unless the failure to give such
notice is materially prejudicial to the Indemnifying Party's ability to
defend such action. No Indemnifying Party, in the defense of any such claim
or litigation shall, except with the consent of each Indemnified Party,
consent to entry of any judgment or enter into any settlement which does
not include as an unconditional term thereof the giving by the claimant or
plaintiff to such Indemnified Party of a release from all liability in
respect to such claim or litigation. No Indemnifying Party shall be
required to indemnify any Indemnified Party with respect to any settlement
entered into without such Indemnifying Party's prior consent (which shall
not be unreasonably withheld).
(f) Purchase in Lieu of Registration. Notwithstanding anything herein to
the contrary, following delivery of a Registration Notice, Company will have the
option, exercisable by written notice delivered to the Holder within ten (10)
business days after Company's receipt of a Registration Notice, irrevocably to
agree to purchase all or any part of the Registrable Securities covered by such
Registration Notice, for cash at per share price equal to the average of the
closing sale prices of Company Common Stock on the Nasdaq National Market for
the ten (10) trading days immediately preceding the date of the Registration
Notice. Any purchase of Registrable Securities by Company hereunder will take
place at a closing to be held at the principal executive offices of Company or
its counsel at any reasonable date and time designated by Company in its
purchase notice, within ten (10) business days following delivery of Company's
purchase notice, or at such other place and time as Company and the Holder shall
agree, and the purchase price shall be paid in immediately available funds.
7. Adjustment Upon Changes in Capitalization; Rights Plans
(a) In the event of any change in the Company Shares by reason of stock
dividends, stock splits, reverse stock splits, mergers (other than the Merger),
recapitalizations, combinations, exchanges of shares and the like, the type and
number of shares or securities subject to the Option and the Exercise Price
shall be adjusted appropriately, and proper provision
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shall be made in the agreements governing such transaction so that Parent shall
receive, upon exercise of the Option, the number and class of shares or other
securities or property that Parent would have received in respect of the Company
Shares if the Option had been exercised immediately prior to such event or the
record date therefor, as applicable.
(b) Prior to such time as the Option is terminated, and at any time after
the Option is exercised (in whole or in part, if at all), the Company shall not
(i) adopt (or permit the adoption of) a shareholders rights plan that contains
provisions for the distribution or exercise of rights thereunder as a result of
Parent or any affiliate or transferee being the beneficial owner of shares of
the Company by virtue of the Option being exercisable or having been exercised
(or as a result of beneficially owning shares issuable in respect of any Option
Shares), or (ii) take any other action which would prevent or disable Parent
from exercising its rights under this Agreement or enjoying the full rights and
privileges possessed by other holders of Company Common Stock generally.
8. Surrender of Option. If, at any time prior to the termination of the
Option, any person or "group" (as defined under Section 13(d) of the Exchange
Act and the rules and regulations thereunder) (an "Acquiring Person") (a)
becomes the beneficial owner of more than a 50% interest in the total
outstanding voting securities of Company or any of its subsidiaries or (b) shall
have entered into an agreement with Company for, or shall have effected, a
merger, consolidation, business combination or similar transaction involving
Company, or any sale, lease (other than in the ordinary course of business),
exchange, transfer, license (other than in the ordinary course of business),
acquisition or disposition of more than 50% of the assets of Company, then
Parent may, at its sole option and upon Parent's written request to Company
prior to the termination of the Option, surrender the Option to Company in
exchange for the payment by Company to Parent in immediately available funds of
an amount equal to the product of: (x) the excess, if any, of (i) the greater of
(A) the highest price per share paid by the Acquiring Person for any shares of
Company Common Stock in such transaction (or, if there is no readily available
per share price in such transaction, the aggregate consideration paid or to be
paid by the Acquiring Person in such transaction, divided by the aggregate
number of shares of Company Common Stock acquired by the Acquiring Person in
such transaction (the value of any consideration other than cash to be
determined, in the case of consideration with a readily ascertainable market
value, by reference to such market value and, in any case where the market value
of the consideration is not so ascertainable, by agreement in good faith between
Parent and Company)) or (B) the highest closing sale price of Company Common
Stock on the Nasdaq National Market during the 20 trading days ending with the
trading day immediately preceding the date of such request over (ii) the
Exercise Price, multiplied by (y) the total number of Option Shares as to which
the Option has not theretofore been exercised. Upon the delivery by Parent to
Company of a surrender request, each party shall take all actions necessary to
consummate such surrender transaction as expeditiously as possible. Upon
exercise of its right to surrender the Option or any portion thereof and full
payment therefor to Parent pursuant to this Section 8, any and all rights of
Parent with respect to the portion of the Option so surrendered shall be
terminated.
9. Restrictions on Transfer; Right of First Refusal. Prior to the fifth
anniversary of the date hereof (the "Expiration Date"), Parent shall not
directly or indirectly, by operation of law
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or otherwise, sell, assign, pledge, or otherwise dispose of or transfer any
Option Shares, other than (a) to Company, (b) to an affiliate or subsidiary of
Parent, (c) pursuant to a Permitted Offering (as defined above), (d) in
"broker's transactions" or to a "market maker", as such terms are defined in
Rule 144 under the Securities Act, (e) to secure loans to Parent or guarantees
of loans to any affiliate of Parent, or (f) in accordance with this Section 9.
At any time after the first occurrence of an Exercise Event and prior to the
fifth anniversary of the date hereof, if Parent shall desire to sell, assign,
transfer or otherwise dispose of all or any of the Option Shares acquired
pursuant to this Agreement, other than as permitted by clauses (a) through (e)
of the preceding sentence, it shall give Company written notice of the proposed
transaction, identifying the proposed transferee and setting forth the terms of
the proposed transaction. Such notice shall be deemed an offer by Parent to
Company to purchase all, but not less than all of the Option Shares covered by
such notice, which may be accepted within five (5) business days of receipt, on
the same terms and conditions and at the same price at which Parent is proposing
to transfer such Option Shares to such transferee. The purchase of any such
shares by Company shall be settled within five (5) business days of the date of
the acceptance of the offer and the purchase price shall be paid in immediately
available funds. In the event of the failure or refusal of Company to purchase
all the Option Shares covered by Parent's notice, Parent may sell all, but not
less than all, of such Option Shares to the proposed transferee at no less than
the price specified and on terms no more favorable to the transferee than those
set forth in Parent's notice to Company, provided that such sale must be
completed within ninety (90) days of the receipt by Company of Parent's notice
of its proposed transfer. In addition, prior to any transfer of Option Shares by
Parent, other than any transfer to Company or a transfer pursuant to Section 6
hereof, Parent shall, if requested by Company, deliver to Company a written
opinion of counsel reasonably satisfactory to Company to the effect that such
transfer may be effected without registration under the Securities Act and any
applicable state securities laws.
10. No Distribution; Restrictive Legends. Parent represents and warrants
that the Option and any Option Shares purchased by it hereunder is being and
will be acquired by it without a view to any distribution thereof and
acknowledges that it may not sell or offer to sell the Option and any Option
Shares other than in a transaction registered under the Securities Act or exempt
from registration thereunder. Each certificate representing Option Shares issued
to Parent hereunder (other than certificates representing shares sold in a
registered public offering pursuant to Section 6) shall include a legend in
substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY BE REOFFERED OR SOLD
ONLY IF SO REGISTERED OR IF AN EXEMPTION FROM SUCH REGISTRATION IS
AVAILABLE.
11. Listing and HSR Filing. The Company, upon the request of Parent, shall
promptly file an application to list the Company Shares to be acquired upon
exercise of the Option for quotation on the Nasdaq National Market and shall use
its reasonable efforts to obtain approval of such listing as soon as
practicable. Promptly after the date hereof, each of the parties hereto shall
promptly file with the Federal Trade Commission and the Antitrust Division of
the United States Department of Justice all required premerger notification and
report forms and other
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documents and exhibits required to be filed under the HSR Act to permit the
acquisition of the Company Shares subject to the Option at the earliest possible
date.
12. Binding Effect. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and permitted
assigns. Nothing contained in this Agreement, express or implied, is intended to
confer upon any person other than the parties hereto and their respective
successors and permitted assigns any rights or remedies of any nature whatsoever
by reason of this Agreement.
13. Specific Performance. The parties recognize and agree that if for any
reason any of the provisions of this Agreement are not performed in accordance
with their specific terms or are otherwise breached, immediate and irreparable
harm or injury would be caused for which money damages would not be an adequate
remedy. Accordingly, each party agrees that in addition to other remedies the
other party shall be entitled to an injunction restraining any violation or
threatened violation of the provisions of this Agreement. In the event that any
action shall be brought in equity to enforce the provisions of the Agreement,
neither party will allege, and each party hereby waives the defense, that there
is an adequate remedy at law.
14. Entire Agreement. This Agreement and the Merger Agreement (including
the appendices and exhibits thereto) constitute the entire agreement between the
parties with respect to the subject matter hereof and supersede all other prior
agreements and understandings, both written and oral, between the parties with
respect to the subject matter hereof.
15. Further Assurances. Each party will execute and deliver all such
further documents and instruments and take all such further action as may be
necessary in order to consummate as promptly as practicable the transactions
contemplated hereby.
16. Severability. In the event that any provision of this Agreement or the
application thereof, becomes or is declared by a court of competent jurisdiction
to be illegal, void or unenforceable, the remainder of this Agreement will
continue in full force and effect and the application of such provision to other
persons or circumstances will be interpreted so as reasonably to effect the
intent of the parties hereto. The parties further agree to replace such void or
unenforceable provision of this Agreement with a valid and enforceable provision
that will achieve, to the extent possible, the economic, business and other
purposes of such void or unenforceable provision.
17. Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or by commercial
delivery service, or sent via telecopy (receipt confirmed) to the parties at the
following addresses or telecopy numbers (or at such other address or telecopy
numbers for a party as shall be specified by like notice):
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If to Parent or Merger Sub, to: If to Company, to:
FLEXTRONICS INTERNATIONAL LTD. THE DII GROUP, INC.
2090 Fortune Drive
San Jose, CA 95053
Attention: Chief Executive Officer Attention: Chief Executive Officer
Telecopy No.: Telecopy No.:
with a copy to: with a copy to:
Fenwick & West LLP Curtis, Mallet-Prevost, Colt & Mosle LLP
Two Palo Alto Square 101 Park Avenue
Palo Alto, California 94306 New York, NY 10178
Attention: David K. Michaels Attention: Jeffrey N. Ostrager
Telecopy No.: (650) 494-1417 Telecopy No.: (212) 697-1559
18. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, regardless of the laws that
might otherwise govern under applicable principles of conflicts of law thereof.
19. Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
20. Expenses. Except as otherwise expressly provided herein or in the
Merger Agreement, all costs and expenses incurred in connection with the
transactions contemplated by this Agreement shall be paid by the party incurring
such expenses.
21. Amendments; Waiver. This Agreement may be amended or waived by the
parties hereto only by an instrument in writing signed on behalf of each of the
parties hereto, or, in the case of a waiver, by an instrument signed on behalf
of the party waiving compliance.
22. Assignment. Neither party may sell, transfer, assign or otherwise
dispose of (by operation of law or otherwise) any of its rights or obligations
under this Agreement or the Option created hereunder to any other person,
without the express written consent of the other party. Any purported assignment
in violation of this Section shall be void. The rights and obligations hereunder
shall inure to the benefit of and be binding upon any successor of a party
hereto.
23. WAIVER OF JURY TRIAL. EACH OF PARENT AND COMPANY HEREBY IRREVOCABLY
WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM
(WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR THE ACTIONS OF PARENT OR COMPANY IN THE NEGOTIATION,
ADMINISTRATION, PERFORMANCE AND ENFORCEMENT HEREOF.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their duly authorized respective officers as of the date first written above.
THE DII GROUP, INC.
By: /s/ Ronald Budacz
---------------------------------
Name: Ronald Budacz
---------------------------------
Title: Chief Executive Officer
---------------------------------
FLEXTRONICS INTERNATIONAL LTD.
By: /s/ Michael E. Marks
---------------------------------
Name: Michael E. Marks
---------------------------------
Title: Chairman and Chief Executive Officer
---------------------------------
[SIGNATURE PAGE TO STOCK OPTION AGREEMENT]
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