Garmin 2009 Annual Report Download - page 52

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Ourofficersanddirectorsexertsubstantialinfluenceoverus.
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AsofJanuary25,2010membersandformermembersofourBoardofDirectorsandourexecutiveofficers,
togetherwithmembersoftheirfamiliesandentitiesthatmaybedeemedaffiliatesoforrelatedtosuchpersonsor
entities,beneficiallyownedapproximately43.3%ofouroutstandingcommonshares.Accordingly,these
shareholdersmaybeabletodeterminetheoutcomeofcorporateactionsrequiringshareholderapproval,suchas
mergersandacquisitions.Thislevelofownershipmayhaveasignificanteffectindelaying,deferringorpreventing
achangeincontrolofGarminandmayadverselyaffectthevotingandotherrightsofotherholdersofour
commonshares.
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Provisionsinourshareholderrightsplanandourcharterdocumentsmightdeter,delayorpreventathirdparty
fromacquiringusandCaymanIslandscorporatelawmayimpedeatakeover,whichcoulddecreasethevalueof
ourshares.
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OurBoardofDirectorshastheauthoritytoissueupto1,000,000preferredsharesandtodeterminethe
price,rights,preferences,privilegesandrestrictions,includingvotingrights,ofthoseshareswithoutanyfurther
voteoractionbytheshareholders.Thiscouldhaveanadverseimpactonthemarketpriceofourcommonshares.
Wehavenopresentplanstoissueanypreferredshares,butwemaydoso.Therightsoftheholdersofcommon
sharesmaybesubjectto,andadverselyaffectedby,therightsoftheholdersofanypreferredsharesthatmaybe
issuedinthefuture.Inaddition,wehaveadoptedaclassifiedboardofdirectors.Ourshareholdersareunableto
removeanydirectorortheentireboardofdirectorswithoutasupermajorityvote.Inaddition,asupermajority
voteisrequiredtoapprovetransactionswithinterestedshareholders.Shareholdersdonothavetherighttocalla
shareholders’meeting.Wehaveadoptedashareholders’rightsplanwhichundercertaincircumstanceswould
significantlyimpairtheabilityofthirdpartiestoacquirecontrolofuswithoutpriorapprovalofourBoardof
Directors.Thisshareholders’rightsplanandtheprovisionsinourcharterdocumentscouldmakeitmoredifficult
forathirdpartytoacquireus,evenifdoingsowouldbenefitourshareholders.
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TheCaymanIslandshaverecentlyintroducedprovisionstotheCompaniesLaw(2009Revision)tofacilitate
mergersandconsolidationsbetweenCaymanIslandscompaniesandnon‐CaymanIslandscompanies.These
provisions,containedwithinPartXVIoftheCompaniesLaw(2009Revision),arebroadlysimilartothemerger
provisionsasprovidedforunderDelawareLaw.
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Therearehoweveranumberofimportantmaterialdifferencesthatcouldimpedeatakeover.First,the
thresholdsforapprovalofthemergerplanbyshareholdersarehigher.Thethresholdsare(a)ashareholder
resolutionbymajorityinnumberrepresenting75%invalueoftheshareholdersvotingtogetherasoneclassor(b)
ifthesharestobeissuedtoeachshareholderintheconsolidatedorsurvivingcompanyaretohavethesamerights
andeconomicvalueasthesharesheldintheconstituentcompany,aspecialresolutionoftheshareholders(being
75%ofthosepresentinpersoninpersonorbyproxyandvoting)votingtogetherasoneclass.
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Asitiswouldnotbeexpectedthattheshareswouldhavethesamerightsandeconomicvaluefollowinga
takeoverbywayofmerger,itisexpectedthatthefirsttestistheonewhichwouldcommonlyapply.Thisthreshold
essentiallyhasthreerequirements.First"amajorityinnumber"oftheshareholdersmustapprove;secondlysuch
majoritymusthold75%"invalue"ofalltheoutstandingsharesandthirdlytheshareholdersmustvotetogetheras
oneclass.
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Secondlytheconsentofeachholderofafixedorfloatingsecurityinterest(inessenceadocumented
securityinterestasopposedtoonearisingbyoperationoflaw)isrequiredtobeobtainedunlesstheGrandCourt
oftheCaymanIslandswaivessuchrequirement.
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ThemergerprovisionscontainedwithinPartXVIoftheCompaniesLaw(2009Revision)docontain
shareholderappraisalrightssimilartothatasprovidedforunderDelawarelaw.Suchrightsarelimitedtoamerger
underPartXVIanddoapplytoschemesofarrangementasdiscussedbelow.
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