Garmin 2005 Annual Report Download - page 57

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In addition, in recent years the stock market in general and the markets for shares of technology companies
in particular, have experienced extreme price fluctuations which have often been unrelated to the operating
performance of affected companies. Any such fluctuations in the future could adversely affect the market price of
our common shares, and the market price of our common shares may decline.
Our officers and directors exert substantial influence over us.
As of February 28, 2006 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 own approximately 44% 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.
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.
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.
Unlike many jurisdictions in the United States, Cayman Islands law does not provide for mergers as that
expression is understood under corporate law in the United States. While Cayman Islands law does have statutory
provisions that provide for the reconstruction and amalgamation of companies, which are commonly referred to in
the Cayman Islands as a “scheme of arrangement,” the procedural and legal requirements necessary to consummate
these transactions are more rigorous and take longer to complete than the procedures typically required to
consummate a merger in the United States. Under Cayman Islands law and practice, a scheme of arrangement in
relation to a solvent Cayman Islands exempted company must be approved at a shareholders’ meeting by a majority
of the company’s shareholders who are present and voting (either in person or by proxy) at such meeting. The shares
voted in favor of the scheme of arrangement must also represent at least 75% of the value of each class of the
company’s shareholders (excluding the shares owned by the parties to the scheme of arrangement) present and
voting at the meeting. The Grand Court of the Cayman Islands must also sanction the convening of these meetings
and the terms of the amalgamation. Although there is no requirement to seek the consent of the creditors of the
parties involved in the scheme of arrangement, the Grand Court typically seeks to ensure that the creditors have
consented to the transfer of their liabilities to the surviving entity or that the scheme of arrangement does not
otherwise materially adversely affect the creditors’ interests. Furthermore, the Grand Court will only approve a
scheme of arrangement if it is satisfied that:
• the statutory provisions as to majority vote have been complied with;
• the shareholders have been fairly represented at the meeting in question;
• the scheme of arrangement is such as a businessman would reasonably approve; and