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FILED PURSUANT TO RULE 424(B)(4)
REGISTRATION STATEMENT NO. 333-69443
PROSPECTUS
$1,000,000,000
SOLECTRON CORPORATION
BY THIS PROSPECTUS, WE MAY OFFER --
COMMON STOCK
PREFERRED STOCK
DEBT SECURITIES
SEE "RISK FACTORS" ON PAGE 6 FOR INFORMATION YOU SHOULD
CONSIDER BEFORE BUYING THE SECURITIES.
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We will provide specific terms of these securities in supplements to this
prospectus. You should read this prospectus and any supplement carefully before
you invest.
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This prospectus may not be used to offer and sell securities unless
accompanied by a prospectus supplement.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
This prospectus is dated June 11, 1999
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SUMMARY
This prospectus is part of a Registration Statement on Form S-3 that we
filed with the Securities and Exchange Commission utilizing a "shelf"
registration process. Under this shelf process, we may, over the next two years,
sell any combination of securities described in this prospectus in one or more
offerings. This prospectus provides you with a general description of the
securities we may offer. Each time we sell securities, we will provide a
prospectus supplement that will contain specific information about the terms of
that offering. The prospectus supplement may also add, update or change
information contained in this prospectus. You should read both this prospectus
and any prospectus supplement together with additional information described
below under the heading "Where You Can Find More Information."
SOLECTRON CORPORATION
Solectron provides electronics manufacturing services to original equipment
manufacturers who design and sell networking equipment, workstations, personal
and notebook computers, computer peripherals or telecommunications equipment,
including Hewlett-Packard Company, Cisco Systems, Inc. and Sun Microsystems,
Inc. These companies contract with Solectron to build their products for them.
Our range of services includes:
- product design,
- materials purchasing and management,
- prototyping,
- printed circuit board assembly (the process of placing components on an
electrical printed circuit board that controls the processing functions
of a personal computer),
- systems assembly (building a complete personal computer, for example, and
testing it to ensure functionality),
- distribution,
- product repair, and
- warranty services.
Our performance of these services allows our customers to remain
competitive by focusing on their core competencies of sales, marketing and
research and development. Solectron has manufacturing sites in North and South
America, Europe and Asia, giving our customers access to manufacturing services
in the regions where they sell product.
We were originally incorporated in California in August 1977. In February
1997, we were reincorporated in Delaware. Our principal executive offices are
located at 777 Gibraltar Drive, Milpitas, California 95035. Our telephone number
is (408) 957-8500.
THE SECURITIES WE MAY OFFER
We may offer up to $1,000,000,000 of any of the following securities either
separately or in units: debt securities, preferred stock and common stock. The
prospectus supplement will describe the specific amounts, prices and terms of
these securities.
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DEBT SECURITIES
We may offer unsecured general obligations in the form of either senior or
subordinated debt. The senior debt securities and the subordinated debt
securities are together referred to in this prospectus as the "debt securities".
We are a holding company. Accordingly, substantially all of our operations are
conducted through our subsidiaries. As a result, the debt securities will be
effectively subordinated to creditors of our subsidiaries.
The senior and subordinated debt will be issued under separate indentures
between Solectron and State Street Bank and Trust Company of California, N.A.,
as trustee. We have summarized the general features of the debt from the
indentures. We encourage you to read the indentures which are exhibits to our
Registration Statement No. (333-69443) and our recent annual report on Form 10-K
and quarterly reports on Form 10-Q. Instructions on how you can get copies of
these documents are provided below under the heading "Where You Can Find More
Information."
GENERAL INDENTURE PROVISIONS THAT APPLY TO SENIOR AND SUBORDINATED DEBT
- Neither indenture limits the amount of debt that we may issue or provides
holders any protection should there be a highly leveraged transaction
involving our company.
- The indentures allow us to merge or to consolidate with another U.S.
company or convey, transfer or lease our properties and assets
substantially as an entirety to another U.S. company, so long as certain
conditions are met. If these events occur, the other company will be
required to assume our responsibilities on the debt, and we will be
released from all liabilities and obligations (except in the case of a
lease).
- The indentures provide that holders of a majority of the total principal
amount of the debt outstanding in any series may vote to change our
obligations or your rights concerning the debt. But to change the payment
of principal, interest, or adversely effect the right to convert or
certain other matters, every holder in that series must consent.
- We may discharge the indentures and defease restrictive covenants by
depositing sufficient funds with the trustee to pay the obligations when
due, as long as certain conditions are met. All amounts due to you on the
debt would be paid by the trustee from the deposited funds.
EVENTS OF DEFAULT
The following are the events of default under the indentures:
- Principal not paid when due,
- Sinking fund payment not made when due,
- Failure to pay interest for 30 days,
- Covenants not performed for 60 days after notice,
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- Bankruptcy, insolvency or reorganization, and
- Any other event of default in the indenture.
REMEDY
Upon an event of default, other than a bankruptcy, insolvency or
reorganization, the trustee or holders of 25% of the principal amount
outstanding in a series may declare principal immediately payable. However, the
holders of a majority in principal amount may, under certain circumstances,
rescind this action.
GENERAL INDENTURE PROVISIONS THAT APPLY ONLY TO SENIOR DEBT SECURITIES
The indenture relating to the senior debt securities contains covenants
restricting our ability to incur secured debt and enter into sale and leaseback
transactions. The senior debt securities will have the same rank as all of our
other unsecured unsubordinated debt.
Senior indebtedness generally includes all indebtedness for money borrowed
by us, except indebtedness that is stated to be not senior to, or have the same
rank as, or is expressly junior to the subordinated debt securities.
GENERAL INDENTURE PROVISIONS THAT APPLY ONLY TO SUBORDINATED DEBT SECURITIES
The subordinated debt securities will be subordinated to all senior
indebtedness.
PREFERRED STOCK
We may issue preferred stock in one or more series and will determine the
dividend, voting, and conversion rights, and other provisions at the time of
sale.
COMMON STOCK
Common stock holders are entitled to receive dividends declared by the
Board of Directors, subject to rights of preferred stock holders. Currently, we
do not pay a dividend. Each holder of common stock is entitled to one vote per
share. The holders of common stock have no preemptive rights or cumulative
voting rights.
WHERE YOU CAN FIND MORE INFORMATION
We file reports, proxy statements and other information with the
Commission, in accordance with the Securities Exchange Act of 1934. You may read
and copy our reports, proxy statements and other information filed by us at the
public reference facilities of the Commission in Washington, D.C., New York, New
York and Chicago, Illinois. Please call the Commission at 1-800-SEC-0330 for
further information about the public reference rooms. Our reports, proxy
statements and other information filed with the Commission are available to the
public over the Internet at the Commission's World Wide Web site at
http://www.sec.gov.
The Commission allows us to "incorporate by reference" the information we
filed with them, which means that we can disclose important information by
referring you to those documents. The information incorporated by reference is
considered to be a part of this prospectus, and information that we file later
with the Commission will automatically update and supersede this information. We
incorporate by reference the documents listed
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below and any future filings made by us with the Commission under Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act until our offering is complete.
- Annual Report on Form 10-K for the fiscal year ended August 31, 1998.
- Quarterly Reports on Form 10-Q for the fiscal quarters ended November 30,
1998 and February 28, 1999.
- Current Reports on Form 8-K filed on January 26, 1999 and February 18,
1999.
- The description of our common stock contained in our Registration
Statement on Form 8-A filed with the Commission on July 18, 1988, and any
amendment or report filed for the purpose of updating such description.
You may request a copy of these filings, at no cost, by writing or
telephoning us at the following address:
Susan S. Wang
Chief Financial Officer
Solectron Corporation
777 Gilbraltar Drive
Milpitas, California 95035
(408) 957-8500
You should rely only on the information incorporated by reference or
provided in this prospectus or any prospectus supplement. We have not authorized
anyone else to provide you with different information. We are not making an
offer of these securities in any state where the offer is not permitted. You
should not assume the information in this prospectus or any prospectus
supplement is accurate as of any date other than the date on the front of those
documents.
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RISK FACTORS
You should consider carefully the specific risks set forth under the
caption "Risk Factors" in the prospectus supplement before making an investment
decision.
A MAJORITY OF OUR SALES COMES FROM A SMALL NUMBER OF CUSTOMERS; IF WE LOSE ANY
OF THESE CUSTOMERS, OUR SALES COULD DECLINE SIGNIFICANTLY.
The majority of our annual sales come from a small number of our customers.
Our 10 largest customers accounted for 68.7% of net sales in fiscal 1998, 65.5%
of net sales in fiscal 1997 and 64.0% of net sales in fiscal 1996. Since we are
dependent upon continued revenue from our 10 largest customers, any material
delay, cancellation or reduction of orders from these or other major customers
could cause our sales to decline significantly. Some of these customers
individually account for more than 10% of our annual net sales. Hewlett-Packard
Company has historically been one of our largest customers and sales to that
corporation were 13.9% of net sales in fiscal 1998, 13.5% of net sales in fiscal
1997 and 10.7% of net sales in fiscal 1996. Sales to Cisco Systems, Inc. and Sun
Microsystems, Inc. were 10.7% and 10.5% of total net sales in fiscal 1998. Sales
to Nortel Networks Inc., formerly Bay Networks, Inc., were 10.4% of total net
sales in fiscal 1997. There is no guarantee that we will be able to retain any
of our 10 largest customers or any other accounts. In addition, our customers
may materially reduce the levels of services ordered from us at any time. This
could cause a significant decline in our net sales and we may not be able to
reduce the accompanying expenses at the same time.
OUR LONG-TERM CONTRACTS DO NOT INCLUDE MINIMUM PURCHASE REQUIREMENTS.
Although we have long-term contracts with a few of our top ten customers,
including Ericsson, NCR, and IBM, under which these customers are obligated to
obtain services from us, they are not obligated to purchase any minimum amount
of services from us. As a result, while we may have some long-term contracts,
there is no guarantee that we will receive any revenue from these contracts. In
addition, these customers with whom we have long-term contracts may materially
reduce the levels of services ordered from us at any time. This could cause a
significant decline in our net sales and we may not be able to reduce the
accompanying expenses at the same time.
POSSIBLE FLUCTUATION OF OPERATING RESULTS FROM QUARTER TO QUARTER COULD AFFECT
THE MARKET PRICE OF OUR COMMON STOCK.
Our quarterly earnings may fluctuate in the future due to a number of
factors including the following:
- Differences in the profitability of the types of manufacturing services
we provide (for example, systems assembly services have lower gross
margins than printed circuit board assembly services),
- Our ability to maximize the hours of use of our equipment and facilities
is dependent on the duration of the production run time for each job and
customer,
- The amount of automation that we can use in the manufacturing process for
cost reduction, which varies depending upon the complexity of the product
being made,
- Our ability to optimize the ordering of inventory in terms of timing and
amount to avoid holding excess inventory in excess of immediate
production (for example, electronic components could become obsolete by
technological advances), and
- Fluctuations in demand for our services or the products being
manufactured.
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Therefore, our operating results in the future could be below the
expectations of securities analysts and investors. If this occurs, the market
price of our common stock could be materially and adversely affected.
WE ARE DEPENDENT UPON THE ELECTRONICS INDUSTRY WHICH CONTINUALLY PRODUCES
TECHNOLOGICALLY ADVANCED PRODUCTS WITH SHORT LIFE CYCLES; OUR INABILITY TO
CONTINUALLY MANUFACTURE SUCH PRODUCTS ON A COST-EFFECTIVE BASIS WOULD HARM OUR
BUSINESS.
A majority of our sales are to corporations in the electronics industry,
which is subject to rapid technological change and product obsolescence. If our
customers are unable to create products that keep pace with the changing
technological environment, their products could become obsolete and the demand
for our services could significantly decline. If we are unable to offer
technologically advanced, quick response manufacturing services to our customers
that are cost effective, our customers' demand for our services will also
decline. In addition, a substantial portion of our revenue is derived from our
ability to offer complete service solutions for our customers. For example, if
we fail to maintain high quality design and engineering services, our sales
would significantly decline.
WE BEAR THE RISK OF PRICE INCREASES ASSOCIATED WITH POTENTIAL SHORTAGES IN THE
AVAILABILITY OF ELECTRONICS COMPONENTS.
At various times, there have been shortages of components in the
electronics industry. One of the services that we perform for many of our
customers is purchasing electronics components used in the manufacturing of
their products. As a result of this service, we bear the risk of price increases
for these components because we are unable to purchase them at the same time
when we agree with our customers on the pricing for the electronic components
that we will use for manufacturing their products.
OUR SALES WILL DECLINE IF OUR COMPETITORS PROVIDE COMPARABLE MANUFACTURING
SERVICES AT A LOWER COST.
We compete with different contract manufacturers depending on the type of
service we provide or the geographic locale of our operations. These competitors
may have greater manufacturing, financial, research and development and/or
marketing resources than we have. In addition, we may not be able to offer
prices as low as some of our competitors because they may have lower cost
structures as a result of where they are located geographically or the services
they provide. Our inability to provide comparable or better manufacturing
services at a lower cost than our competitors could cause our sales to decline.
IF WE ARE UNABLE TO MANAGE OUR RAPID GROWTH AND ASSIMILATE NEW OPERATIONS IN A
COST-EFFECTIVE MANNER, OUR PROFITABILITY COULD DECLINE.
We have experienced rapid growth over our last five fiscal years, with net
sales increasing from $1.5 billion in fiscal 1994 to $5.3 billion in fiscal
1998. Our historical growth may not continue. In recent years, we have
established operations in different places throughout the world. For example, in
fiscal 1998, we opened offices in Taiwan and Israel, commenced manufacturing
operations in Mexico and Romania and, in fiscal 1999, announced a joint venture
with Ingram Micro, Inc. In that same fiscal year, we acquired foreign facilities
in Brazil, Sweden and Ireland. Furthermore, through acquisitions in fiscal 1998
and 1999, we acquired facilities in Georgia and South Carolina and enhanced our
capabilities in North Carolina and Texas. As we manage and continue to expand
our new operations, we may incur substantial infrastructure and working capital
costs. If we do not
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achieve sufficient growth to offset increased expenses associated with our rapid
expansion, our profitability will decline.
WE NEED TO MANAGE INTEGRATION OF OUR ACQUISITIONS TO MAINTAIN PROFITABILITY.
In fiscal 1998 and 1999, we completed acquisitions of certain manufacturing
assets and facilities from Ericsson, NCR, IBM and Mitsubishi. We also continue
to evaluate acquisition opportunities and may pursue additional acquisitions
over time. These acquisitions involve risks, including:
- integration and management of the operations,
- retention of key personnel,
- integration of purchasing operations and information systems,
- management of an increasingly larger and more geographically disparate
business, and
- diversion of management's attention from other ongoing business concerns.
Our profitability will suffer if we are unable to successfully integrate
and manage our recent acquisitions, as well as any future acquisitions that we
might pursue, or if we do not achieve sufficient revenue to offset the increased
expenses associated with these acquisitions.
OUR INTERNATIONAL SALES ARE A SIGNIFICANT AND GROWING PORTION OF OUR REVENUES;
WE ARE INCREASINGLY EXPOSED TO UNIQUE RISKS ASSOCIATED WITH OPERATING
INTERNATIONALLY.
In fiscal 1998 approximately 34% of our sales came from outside of the
United States. As a result of our foreign sales and facilities, our operations
are subject to a variety of risks that are unique to our international
operations including the following:
- Adverse movement of foreign currencies against our U.S. dollar reporting
currency,
- Import and export duties, and value add taxes that we may have to absorb,
- Import and export regulation changes that could erode our profit margins
or restrict exports,
- Potential restrictions on the transfer of funds,
- Inflexible employee contracts in the event of business downturns, and
- The burden and cost of compliance with foreign laws.
In addition, we have operations in several locations that have inflationary
economies or potentially volatile currencies, including Mexico, Brazil, China
and Romania. In the future, these factors may have a material adverse impact on
the results of our operations. The Southeast Asian, Latin American and Eastern
European markets are experiencing currency, economic and political instability.
To date, our operations have not experienced significant adverse effects from
this instability.
WE MAY NOT BE ABLE TO ADEQUATELY PROTECT OR ENFORCE OUR INTELLECTUAL PROPERTY
RIGHTS AND WE COULD BECOME INVOLVED IN INTELLECTUAL PROPERTY DISPUTES.
Our ability to effectively compete may be affected by our ability to
protect our proprietary information. We hold a limited number of patents and
other license rights. These patent and license rights may not provide meaningful
protection for our
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manufacturing process and equipment innovations. In addition, in the future
third parties may assert infringement claims against us or our customers. In the
event of an infringement claim, we may be required to spend a significant amount
of money to develop a non-infringing manufacturing process or to obtain
licenses. We may not be successful in developing such a process or obtaining a
license on reasonable terms, if at all. In addition, any such litigation could
be lengthy and costly and could have a material adverse effect on our financial
condition.
FAILURE TO COMPLY WITH ENVIRONMENTAL REGULATIONS COULD HARM OUR BUSINESS.
As a company in the contract manufacturing services industry, we are
subject to a variety of environmental regulations relating to the use, storage
and discharge and disposal of hazardous chemicals used during our manufacturing
process. Although we have never sustained any significant loss as a result of
noncompliance with such regulations, any failure by us to comply with
environmental laws and regulations could result in liabilities or the suspension
of production. In addition, these laws and regulations could restrict our
ability to expand our facilities or require us to acquire costly equipment or
incur other significant costs to comply with regulations.
OUR STOCK PRICE MAY BE VOLATILE DUE TO FACTORS OUTSIDE OF OUR CONTROL.
Our stock price could fluctuate due to the following factors:
- Announcements of operating results and business conditions by our
customers,
- Announcements by our competitors relating to new customers or
technological innovations or new services,
- Economic developments in the electronics industry as a whole,
- Political and economic development of countries in which we have
operations, and
- General market conditions.
YEAR 2000 COMPLIANCE ISSUES COULD HARM OUR BUSINESS.
The Year 2000 issue is the result of computer programs written using two
digits rather than four to define the applicable year. Computer programs that
have this date-sensitive software may recognize a date using "00" as the year
1900 rather than the year 2000. This could result in a system failure or
miscalculations causing disruptions of operations, including, among other
things, a temporary inability to process transactions, send invoices, order
materials or otherwise engage in normal business activities.
A key to our ability to successfully manage our operations is the
responsiveness of the supply chain for electronics components. This supply chain
is often controlled by computer systems, which could fail. While we control some
of these systems, our vendors, our customers and service providers that are
outside of our control operate some of these computer systems as well. If the
computer systems within their control fail, this could delay our receipt of
previously-ordered electronics components thereby causing us to delay, cancel or
modify orders from our customers, which could harm our business.
We have not yet developed a final contingency plan to handle the Year 2000
problem and, when developed, such a contingency plan may still not be successful
in preventing a disruption of our operations. Although we have extensively
tested our equipment and interfaces with other companies, we cannot be sure that
this testing will fully replicate the actual situation when the Year 2000
arrives.
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USE OF PROCEEDS
Unless otherwise indicated in the prospectus supplement, the net proceeds
from the sale of securities offered by this prospectus will be used for general
corporate purposes, including capital expenditures and to meet working capital
needs. We expect from time to time to evaluate the acquisition of businesses,
products and technologies for which a portion of the net proceeds may be used.
Pending such uses, we will invest the net proceeds in interest-bearing
securities.
RATIO OF EARNINGS TO FIXED CHARGES
The ratio of earnings to fixed charges for each of the periods indicated is
as follows:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
FISCAL YEAR ENDED AUGUST 31, FEBRUARY 28,
------------------------------------- -------------
1994 1995 1996 1997 1998 1998 1999
----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges....... 6.01x 8.73x 8.99x 8.06x 9.30x 8.81x 9.02x
</TABLE>
These computations include us and our consolidated subsidiaries. For these
ratios, "earnings" represents income before taxes plus fixed charges (excluding
capitalized interest) and amortization of previously capitalized interest. Fixed
charges consists of (1) interest on all indebtedness and amortization of debt
discount and expense, (2) capitalized interest and (3) an interest factor
attributable to rentals.
DESCRIPTION OF THE DEBT SECURITIES
The debt securities will either be our senior debt securities or our
subordinated debt securities. The debt securities will be issued under one or
more separate indentures between us and State Street Bank and Trust Company of
California, N.A., as trustee. Senior debt securities will be issued under a
senior indenture and subordinated debt securities will be issued under a
subordinated indenture. Together, the senior indenture and subordinated
indenture are called indentures. The prospectus, together with its prospectus
supplement, will describe all the material terms of a particular series of debt
securities.
The following is a summary of the most important provisions and definitions
of the indentures. For additional information, you should look at the applicable
indenture that is filed as an exhibit to the registration statement which
includes the prospectus. In this description of the debt securities, the words
"Solectron", "we", "us" or "our" refer only to Solectron Corporation and not to
any of our subsidiaries.
GENERAL
Debt securities may be issued in separate series without limitation as to
aggregate principal amount. We may specify a maximum aggregate principal amount
for the debt securities of any series.
We are not limited as to the amount of debt securities we may issue under
the indentures.
The prospectus supplement will set forth:
- whether the debt securities are senior or subordinated,
- the offering price,
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- the title,
- any limit on the aggregate principal amount,
- the person who shall be entitled to receive interest, if other than the
record holder on the record date,
- the date the principal will be payable,
- the interest rate, if any, the date interest will accrue, the interest
payment dates and the regular record dates,
- the place where payments may be made,
- any mandatory or optional redemption provisions,
- if applicable, the method for determining how principal, premium, if any,
or interest will be calculated by reference to an index or formula,
- if other than U.S. currency, the currency or currency units in which
principal, premium, if any, or interest will be payable and whether we or
the holder may elect payment to be made in a different currency,
- the portion of the principal amount that will be payable upon
acceleration of stated maturity, if other than the entire principal
amount,
- if the principal amount payable at stated maturity will not be
determinable as of any date prior to stated maturity, the amount which
will be deemed to be the principal amount,
- any defeasance provisions if different from those described below under
"Satisfaction and Discharge -- Defeasance,"
- any conversion or exchange provisions,
- whether the debt securities will be issuable in the form of a global
security,
- any subordination provisions if different from those described below
under "Subordinated Debt Securities,"
- any deletions of, or changes or additions to, the events of default or
covenants, and
- any other specific terms of such debt securities.
Unless otherwise specified in the prospectus supplement:
- the debt securities will be registered debt securities; and
- registered debt securities denominated in U.S. dollars will be issued in
denominations of $1,000 or an integral multiple of $1,000.
Debt securities may be sold at a substantial discount below their stated
principal amount, bearing no interest or interest at a rate which at time of
issuance is below market rates.
EXCHANGE AND TRANSFER
Debt securities may be transferred or exchanged at the office of the
security registrar or at the office of any transfer agent designated by us.
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We will not impose a service charge for any transfer or exchange, but we
may require holders to pay any tax or other governmental charges associated with
any transfer or exchange.
In the event of any potential redemption of debt securities of any series,
we will not be required to:
- issue, register the transfer of, or exchange, any debt security of that
series during a period beginning at the opening of business 15 days
before the day of mailing of a notice of redemption and ending at the
close of business on the day of the mailing, or
- register the transfer of or exchange any debt security of that series
selected for redemption, in whole or in part, except the unredeemed
portion being redeemed in part.
We have initially appointed the trustee as the security registrar. Any
transfer agent, in addition to the security registrar, initially designated by
us will be named in the prospectus supplement. We may designate additional
transfer agents or change transfer agents or change the office of the transfer
agent. However, we will be required to maintain a transfer agent in each place
of payment for the debt securities of each series.
GLOBAL SECURITIES
The debt securities of any series may be represented, in whole or in part,
by one or more global securities. Each global security will:
- be registered in the name of a depositary that we will identify in a
prospectus supplement,
- be deposited with the depositary or nominee or custodian, and
- bear any required legends.
No global security may be exchanged in whole or in part for debt securities
registered in the name of any person other than the depositary or any nominee
unless:
- the depositary has notified us that it is unwilling or unable to continue
as depositary or has ceased to be qualified to act as depositary,
- an event of default is continuing, or
- any other circumstances described in a prospectus supplement.
As long as the depositary, or its nominee, is the registered owner of a
global security, the depositary or nominee will be considered the sole owner and
holder of the debt securities represented by the global security for all
purposes under the indentures. Except in the above limited circumstances, owners
of beneficial interests in a global security:
- will not be entitled to have the debt securities registered in their
names,
- will not be entitled to physical delivery of certificated debt
securities, and
- will not be considered to be holders of those debt securities under the
indenture.
Payments on a global security will be made to the depositary or its nominee
as the holder of the global security. Some jurisdictions have laws that require
that certain purchasers of securities take physical delivery of such securities
in definitive form. These laws may impair the ability to transfer beneficial
interests in a global security.
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Institutions that have accounts with the depositary or its nominee are
referred to as "participants." Ownership of beneficial interests in a global
security will be limited to participants and to persons that may hold beneficial
interests through participants. The depositary will credit, on its book-entry
registration and transfer system, the respective principal amounts of debt
securities represented by the global security to the accounts of its
participants.
Ownership of beneficial interests in a global security will be shown on and
effected through records maintained by the depositary, with respect to
participants' interests, or any participant, with respect to interests of
persons held by participants on their behalf.
Payments, transfers and exchanges relating to beneficial interests in a
global security will be subject to policies and procedures of the depositary.
The depositary policies and procedures may change from time to time. Neither we
nor the trustee will have any responsibility or liability for the depositary's
or any participant's records with respect to beneficial interests in a global
security.
PAYMENT AND PAYING AGENTS
The provisions of this paragraph will apply to the debt securities unless
otherwise indicated in the prospectus supplement. Payment of interest on a debt
security on any interest payment date will be made to the person in whose name
the debt security is registered at the close of business on the regular record
date. Payment on debt securities of a particular series will be payable at the
office of a paying agent or paying agents designated by us. However, at our
option, we may pay interest by mailing a check to the record holder. The
corporate trust office will be designated as our sole paying agent.
We may also name any other paying agents in the prospectus supplement. We
may designate additional paying agents, change paying agents or change the
office of any paying agent. However, we will be required to maintain a paying
agent in each place of payment for the debt securities of a particular series.
All moneys paid by us to a paying agent for payment on any debt security
which remain unclaimed for a period ending the earlier of:
- 10 business days prior to the date the money would be turned over to the
state, or
- at the end of two years after such payment was due
will be repaid to us. Thereafter, the holder may look only to Solectron for such
payment.
CONSOLIDATION, MERGER AND SALE OF ASSETS
We may not consolidate with or merge into any other person, in a
transaction in which we are not the surviving corporation, or convey, transfer
or lease its properties and assets substantially as an entirety to, any person,
unless:
- the successor, if any, is a U.S. corporation, limited liability company,
partnership, trust or other entity,
- the successor assumes Solectron's obligations on the debt securities and
under the indentures,
- immediately after giving effect to the transaction, no default or event
of default shall have occurred and be continuing, and
- certain other conditions are met.
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EVENTS OF DEFAULT
Each indenture defines an event of default with respect to any series of
debt securities as one or more of the following events:
(1) failure to pay principal of or any premium on any debt security of that
series when due,
(2) failure to pay any interest on any debt security of that series for 30
days when due,
(3) failure to deposit any sinking fund payment when due,
(4) failure to perform any other covenant in the indenture continued for 60
days after being given the notice required in the indenture,
(5) our bankruptcy, insolvency or reorganization, and
(6) any other event of default specified in the prospectus supplement.
An event of default of one series of debt securities is not necessarily an
event of default for any other series of debt securities.
If an event of default, other than an event of default described in clause
(5) above, shall occur and be continuing, either the trustee or the holders of
at least 25% in aggregate principal amount of the outstanding securities of that
series may declare the principal amount of the debt securities of that series to
be due and payable immediately.
If an event of default described in clause (5) above shall occur, the
principal amount of all the debt securities of that series, will automatically
become immediately due and payable. Any payment by us on the subordinated debt
securities following any such acceleration will be subject to the subordination
provisions described below under "Subordinated Debt Securities."
After acceleration the holders of a majority in aggregate principal amount
of the outstanding securities of that series may, under certain circumstances,
rescind and annul such acceleration if all events of default, other than the
non-payment of accelerated principal, or other specified amount, have been cured
or waived.
Other than the duty to act with the required care during an event of
default, the trustee will not be obligated to exercise any of its rights or
powers at the request of the holders unless the holders shall have offered to
the trustee reasonable indemnity. Generally, the holders of a majority in
aggregate principal amount of the outstanding debt securities of any series will
have the right to direct the time, method and place of conducting any proceeding
for any remedy available to the trustee or exercising any trust or power
conferred on the trustee.
A holder will not have any right to institute any proceeding under the
indentures, or for the appointment of a receiver or a trustee, or for any other
remedy under the indentures, unless:
(1) the holder has previously given to the trustee written notice of a
continuing event of default with respect to the debt securities of that
series,
(2) the holders of at least 25% in aggregate principal amount of the
outstanding debt securities of that series have made a written request
and have offered reasonable indemnity to the trustee to institute the
proceeding, and
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(3) the trustee has failed to institute the proceeding and has not received
direction inconsistent with the original request from the holders of a
majority in aggregate principal amount of the outstanding debt
securities of that series within 60 days after the original request.
Holders may, however, sue to enforce the payment of principal, premium or
interest on the debt security on or after the due date without following the
procedures listed in (1) through (3) above.
We will furnish the trustee an annual statement by our officers as to
whether or not we are in default in the performance of the indenture and, if so,
specifying all known defaults.
MODIFICATION AND WAIVER
Solectron and the trustee may make modifications and amendments to the
indentures with the consent of the holders of a majority in aggregate principal
amount of the outstanding securities of each series affected by the modification
or amendment.
However, neither we nor the trustee may make any modification or amendment
without the consent of the holder of each outstanding security of that series
affected by the modification or amendment if such modification or amendment
would:
- change the stated maturity of any debt security,
- reduce the principal, premium, if any, or interest on any debt security,
- reduce the principal of an original issue discount security or any other
debt security payable on acceleration of maturity,
- change the place of payment or the currency in which any debt security is
payable,
- impair the right to enforce any payment after the stated maturity or
redemption date,
- if subordinated debt securities, modify the subordination provisions in a
materially adverse manner to the holders,
- adversely affect the right to convert any debt security, or
- change the provisions in the indenture that relate to modifying or
amending the indenture.
SATISFACTION AND DISCHARGE; DEFEASANCE
We may be discharged from our obligations on the debt securities of any
series that have matured or will mature or be redeemed within one year if we
deposit with the trustee enough cash to pay all the principal, interest and any
premium due to the stated maturity date or redemption date of the debt
securities.
Each indenture contains a provision that permits us to elect:
- to be discharged from all of our obligations, subject to limited
exceptions, with respect to any series of debt securities then
outstanding; and/or
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- to be released from our obligations under the following covenants and
from the consequences of an event of default resulting from a breach of
these covenants:
(1) the limitations on sale and leaseback transactions under the senior
indenture,
(2) the limitations on secured debt under the senior indenture,
(3) the subordination provisions under the subordinated indenture, and
(4) covenants as to payment of taxes and maintenance of properties.
To make either of the above elections, we must deposit in trust with the
trustee enough money to pay in full the principal, interest and premium on the
debt securities. This amount may be made in cash and/or U.S. government
obligations. As a condition to either of the above elections, we must deliver to
the trustee an opinion of counsel that the holders of the debt securities will
not recognize income, gain or loss for Federal income tax purposes as a result
of the action.
If any of the above events occurs, the holders of the debt securities of
the series will not be entitled to the benefits of the indenture, except for
registration of transfer and exchange of debt securities and replacement of
lost, stolen or mutilated debt securities.
NOTICES
Notices to holders will be given by mail to the addresses of the holders in
the security register.
GOVERNING LAW
The indentures and the debt securities will be governed by, and construed
under, the law of the State of New York.
REGARDING THE TRUSTEE
The indentures limit the right of the trustee, should it become a creditor
of Solectron, to obtain payment of claims or secure its claims.
The trustee is permitted to engage in certain other transactions. However,
if the trustee, acquires any conflicting interest, and there is a default under
the debt securities of any series for which they are trustee, the trustee must
eliminate the conflict or resign.
SENIOR DEBT SECURITIES
The senior debt securities will be unsecured and will rank equally with all
of our other unsecured and non-subordinated senior debt.
Covenants in the Senior Indenture
Limitations on Liens. Neither we nor any restricted subsidiary will issue,
incur, create, assume or guarantee any secured debt without securing the senior
debt securities equally and ratably with or prior to that secured debt unless
the sum of the following amounts would not exceed 10% of our consolidated net
tangible assets:
- the total amount of all secured debt that the senior debt securities are
not secured equally and ratably with, and
- the attributable debt in respect of sale and leaseback transactions
entered into after the date of the issuance of the debt securities.
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We do include in the above calculation any sale and leaseback transactions
described under clause (2) of "Limitation on Sale and Leaseback Transactions"
below or any sale and leaseback transactions of principal property in which we
or our restricted subsidiary would be able to incur secured debt on the
principal property in an amount at least equal to the attributable debt with
respect to mortgages permitted under the definition of secured debt.
Limitations on Sale and Lease-back Transactions. Neither we nor any
restricted subsidiary will enter into any lease longer than three years covering
any of our principal property or any restricted subsidiary that is sold to any
other person in connection with that lease unless either:
(1) we or any restricted subsidiary would be entitled to incur indebtedness
secured by a mortgage on the principal property involved in such
transaction at least equal in amount to the attributable debt with
respect to the lease, without equally and ratably securing the senior
debt securities, pursuant to "Limitation on Liens" described above, or
(2) an amount equal to the greater of the following amounts is applied 180
days to the retirement of our or any restricted subsidiary's long-term
debt or the purchase or development of comparable property:
a. the net proceeds from the sale;
b. the fair market value of the property at the time of the sale; or
c. the attributable debt with respect to the sale and leaseback
transaction.
Definitions
"attributable debt" with regard to a sale and leaseback transaction means
the lesser of:
(1) the fair market value of such property as determined in good faith by
our board of directors, or
(2) discounted present value of all net rentals under the lease.
"consolidated net tangible assets" means the total amount of assets, less
reserves and other deductible items, after deducting:
- all current liabilities,
- all current maturities of debt having more than a 12 month maturity,
- all capital lease obligations,
- all goodwill, trade names, trademarks, patents, unamortized debt discount
and expense and other similar intangibles, other than capitalized
unamortized product development costs, and
- adjustments on account of minority interests of other persons holding
stock of our subsidiaries.
"mortgage" means a mortgage, security interest, pledge, lien, charge or
other encumbrance.
"principal property" means the land, improvements, buildings and fixtures
owned by us or a restricted subsidiary located in the United States that
constitutes our principal corporate office, any manufacturing plant or any
manufacturing facility and has a book
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value in excess of 1% of our consolidated net tangible assets as of the
determination date. Principal property does not include any property that our
board of directors has determined not to be of material importance to the
business conducted by us and our subsidiaries, taken as a whole.
"restricted subsidiary" means any subsidiary that owns any principal
property. "Restricted subsidiary" does not include:
- any subsidiary primarily engaged in financing receivables or in the
finance business, or
- any of our less than 80% owned subsidiaries if the common stock of the
subsidiary is traded on any national securities exchange or quoted on the
Nasdaq National Market or over the counter.
"secured debt" means any of our debt or any debt of a restricted subsidiary
for borrowed money secured by a mortgage on any principal property or any stock
or indebtedness of a restricted subsidiary. Secured debt does not include:
- mortgages on property, shares of stock or indebtedness or other assets of
a corporation at the time it becomes a restricted subsidiary,
- mortgages on property, shares of stock or indebtedness or other assets
existing at the time of acquisition by Solectron or a restricted
subsidiary (including leases), or mortgages to secure payment of all or
any part of the purchase price, or to secure any debt within 180 days
after the acquisition thereof, or in the case of property, the completion
of construction, improvement or commencement of commercial operation of
the property,
- mortgages to secure indebtedness owing to Solectron or to a restricted
subsidiary,
- mortgages existing at the date of the senior indenture,
- mortgages on property existing at the time the person is merged or
consolidated with us or a restricted subsidiary,
- mortgages on property at the time of a sale or lease of the properties of
a person as an entity or substantially as an entity to us or a restricted
subsidiary,
- mortgages incurred to finance the acquisition or construction of property
secured by mortgages in favor of the United States or a political
subdivision of the Unites States, or
- mortgages constituting any extension, renewal or replacement of any
mortgage listed above to the extent the mortgage is not increased.
SUBORDINATED DEBT SECURITIES
The indebtedness evidenced by the subordinated debt securities is
subordinated to the extent provided in the subordinated indenture to the prior
payment in full of all senior indebtedness, including any senior debt
securities.
Upon any distribution of our assets upon any dissolution, winding up,
liquidation or reorganization, payments on the subordinated debt securities will
be subordinated in right of payment to the prior payment in full in cash of all
Senior Indebtedness.
In the event of any acceleration of the subordinated debt securities
because of an event of default, holders of any senior indebtedness would be
entitled to payment in full in
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cash of all senior indebtedness before the holders of subordinated debt
securities are entitled to receive any payment or distribution.
We are required to promptly notify holders of senior indebtedness if
payment of the subordinated debt securities is accelerated because of an event
of default.
We may also not make payment on the subordinated debt securities if:
- a default in the payment of designated senior indebtedness occurs and is
continuing, or
- any other default occurs and is continuing with respect to designated
senior indebtedness that permits holders of designated senior
indebtedness to accelerate its maturity, and the trustee receives a
payment blockage notice from us or some other person permitted to give
the notice under the subordinated indenture.
We may and shall resume payments on the subordinated debt securities:
- in case of a payment default, when the default is cured or waived, and
- in case of a nonpayment default, the earlier of when the default is cured
or waived or 179 days after the receipt of the payment blockage notice if
the maturity of the designated senior indebtedness has not been
accelerated.
No new payment blockage period may start unless:
- 365 days have elapsed from the effectiveness of the prior payment
blockage notice, and
- all scheduled payments on the subordinated debt securities have been paid
in full.
No nonpayment default that existed or was continuing on the date of
delivery of any payment blockage notice to the trustee shall be the basis for a
subsequent payment blockage notice.
As a result of these subordination provisions, in the event of our
bankruptcy, dissolution or reorganization, holders of Senior Indebtedness may
receive more, ratably, and holders of the subordinated debt securities may
receive less, ratably, than our other creditors. The subordination provisions
will not prevent the occurrence of any event of default under the subordinated
indenture.
If the trustee or any holder receives any payment that should not have been
made to them in contravention of subordination provisions before all senior
indebtedness is paid in full, then such payment will be held in trust for the
holders of senior indebtedness.
Senior debt securities will constitute senior indebtedness under the
subordinated indenture.
Definitions
"designated senior indebtedness" means our existing credit agreement and
off-balance sheet real estate leases and any of our other senior indebtedness
that expressly provides that it is "designated senior indebtedness."
"indebtedness" means:
(1) all indebtedness, obligations and other liabilities for borrowed money
or evidenced by bonds, debentures, notes or similar instruments,
excluding any account payable
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or accrued current liability incurred in the ordinary course of
business in connection with the obtaining of materials or services,
(2) all obligations with respect to letters of credit, bank guarantees or
bankers' acceptances,
(3) all capitalized lease obligations,
(4) certain types of off-balance sheet real-estate leases,
(5) all interest rate or foreign currency agreements,
(6) all guarantees of clauses (1) through (5),
(7) any indebtedness or other obligations described in clauses (1) through
(5) secured by any mortgage, pledge or lien, and
(8) renewals or amendments of the types of obligations described in clauses
(1) through (7).
"senior indebtedness" means the principal, premium, if any, interest, fees,
costs, expenses and other amounts on our indebtedness. Senior indebtedness shall
not include:
- indebtedness that expressly states that it is not senior to or expressly
states that it is same rank or junior to the subordinated debt
securities,
- any indebtedness to any of our majority-owned subsidiaries,
- the 7 3/8% Senior Notes due 2006, and
- the Liquid Yield Option Notes (Zero Coupon-Senior) due 2019.
"subsidiary" means:
- any corporation of which more than 66 2/3% is owned by us or by one or
more or our other subsidiaries, and
- any partnership of which more than 66 2/3% of the equity capital or
profit interest is owned by us or by one or more of our other
subsidiaries.
DESCRIPTION OF CAPITAL STOCK
Our authorized capital stock consists of 401,200,000 shares. Those shares
consist of (1) 400,000,000 shares designated as common stock, $0.001 par value,
and (2) 1,200,000 shares designated as preferred stock, $0.001 par value. The
only equity securities currently outstanding are shares of common stock. As of
February 28, 1999, there were approximately 238,600,000 shares of common stock
issued and outstanding.
COMMON STOCK
Holders of common stock are entitled to receive dividends declared by the
Board of Directors, out of funds legally available for the payment of dividends,
subject to the rights of holders of preferred stock. Currently, we are not
paying a dividend. Each holder of common stock is entitled to one vote per
share. Upon any liquidation, dissolution or winding up of our business, the
holders of common stock are entitled to share equally in all assets available
for distribution after payment of all liabilities and provision for liquidation
preference of shares of preferred stock then outstanding. The holders of common
stock have no preemptive rights and no rights to convert their common stock into
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any other securities. There are also no redemption or sinking fund provisions
applicable to the common stock.
All outstanding shares of common stock are fully paid and nonassessable.
Our common stock is listed on the New York Stock Exchange under the symbol
"SLR." The transfer agent and registrar for the common stock is Boston Equiserve
Limited Partnership.
PREFERRED STOCK
The following description of preferred stock and the description of the
terms of a particular series of preferred stock that will be set forth in the
related prospectus supplement are not complete. These descriptions are qualified
in their entirety by reference to the certificate of designation relating to
that series. The rights, preferences, privileges and restrictions of the
preferred stock of each series will be fixed by the certificate of designation
relating to that series. The prospectus supplement also will contain a
description of certain United States federal income tax consequences relating to
the purchase and ownership of the series of preferred stock that is described in
the prospectus supplement.
As of February 28, 1999, there were no shares of preferred stock
outstanding. The Board of Directors has the authority, without further action by
the stockholders, to issue up to 1,200,000 shares of preferred stock in one or
more series and to fix the following terms of the preferred stock:
- designations, powers, preferences, privileges,
- relative participating, optional or special rights, and
- the qualifications, limitations or restrictions, including dividend
rights, conversion rights, voting rights, terms of redemption and
liquidation preferences.
Any or all of these rights may be greater than the rights of the common stock.
The Board of Directors, without stockholder approval, can issue preferred
stock with voting, conversion or other rights that could negatively affect the
voting power and other rights of the holders of common stock. Preferred stock
could thus be issued quickly with terms calculated to delay or prevent a change
in control of Solectron or make it more difficult to remove our management.
Additionally, the issuance of preferred stock may have the effect of decreasing
the market price of the common stock.
The prospectus supplement will specify:
- the maximum number of shares,
- the designation of the shares,
- the annual dividend rate, if any, whether the dividend rate is fixed or
variable, the date dividends will accrue, the dividend payment dates, and
whether dividends will be cumulative,
- the price and the terms and conditions for redemption, if any, including
redemption at our option or at the option of the holders, including the
time period for redemption, and any accumulated dividends or premiums,
- the liquidation preference, if any, and any accumulated dividends upon
the liquidation, dissolution or winding up of Solectron's affairs,
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- any sinking fund or similar provision, and, if so, the terms and
provisions relating to the purpose and operation of the fund,
- the terms and conditions, if any, for conversion or exchange of shares of
any other class or classes of our capital stock or any series of any
other class or classes, or of any other series of the same class, or any
other securities or assets, including the price or the rate of conversion
or exchange and the method, if any, of adjustment,
- the voting rights, and
- any or all other preferences and relative, participating, optional or
other special rights, privileges or qualifications, limitations or
restrictions.
Preferred stock will be fully paid and nonassessable upon issuance. The
preferred stock or any series of preferred stock may be represented, in whole or
in part, by one or more global certificates, which will have an aggregate
principal amount equal to that of the preferred stock represented by the global
certificate.
Each global certificate will:
- be registered in the name of a depositary or a nominee of the depositary
identified in the prospectus supplement,
- be deposited with such depositary or nominee or a custodian for the
depositary, and
- will bear a legend regarding the restrictions on exchanges and
registration of transfer and any other matters as may be provided for
under the certificate of designation.
DELAWARE GENERAL CORPORATION LAW SECTION 203
We are a Delaware corporation subject to Section 203 of the Delaware
General Corporation Law, an anti-takeover law. In general, Section 203 prohibits
a publicly held Delaware corporation from engaging in a "business combination"
transaction with an "interested stockholder" for a period of three years after
the date the person became an interested stockholder, unless (with certain
exceptions) the business combination or the transaction in which the person
became an interested stockholder is approved in a prescribed manner, as
described below.
The Section 203 restrictions do not apply if:
(1) the business combination or transaction is approved by our Board of
Directors before the date the interested stockholder obtained such
status,
(2) upon consummation of the transaction which resulted in the stockholder
obtaining such status, the stockholder owned at least 85% of the shares
of stock entitled to vote generally in the election of directors (the
"voting stock") that are outstanding at the time the transaction
commenced. The 85% calculation does not include those shares
- owned by directors who are also officers of the target corporation,
and
- held by employee stock plans which do not permit employees to decide
confidentially whether to accept a tender or exchange offer, or
- on or after the date the interested stockholder obtained such
status, the business combination is approved by our Board of
Directors and at a
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stockholder meeting by the affirmative vote of at least 66 2/3% of
the outstanding voting stock which is not owned by the interested
stockholder.
Generally, a "business combination" includes a merger, asset sale, or other
transaction resulting in a financial benefit to the interested stockholder.
Generally, an "interested stockholder" is a person who, together with affiliates
and associates, owns, or within three years prior to the determination of
interested stockholder status, did own, 15% or more of a corporation's voting
stock. Section 203 may prohibit or delay mergers or other takeover or change in
control attempts with respect to Solectron. As a result, Section 203 may
discourage attempts to acquire us even though such transaction may offer our
stockholders the opportunity to sell their stock at a price above the prevailing
market price.
PLAN OF DISTRIBUTION
We may sell the Securities separately or together:
- through one or more underwriters or dealers in a public offering and sale
by them,
- directly to investors, or
- through agents.
We may describe the Securities from time to time in one or more
transactions at a fixed price or prices, which may be changed from time to time:
- at market prices prevailing at the times of sale,
- at prices related to such prevailing market prices, or
- at negotiated prices.
We will describe the method of distribution of the Securities in the
prospectus supplement.
Underwriters, dealers or agents may receive compensation in the form of
discounts, concessions or commissions from us or our purchasers (as their agents
in connection with the sale of Securities). These underwriters, dealers or
agents may be considered to be underwriters under the Securities Act. As a
result, discounts, commissions, or profits on resale received by the
underwriters, dealers or agents may be treated as underwriting discounts and
commissions. The prospectus supplement will identify any such underwriter,
dealer or agent, and describe any compensation received by them from us. Any
initial public offering price and any discounts or concessions allowed or
reallowed or paid to dealers may be changed from time to time.
Underwriters, dealers and agents may be entitled to indemnification by us
against certain civil liabilities, including liabilities under the Securities
Act, or to contribution with respect to payments made by the underwriters,
dealers or agents, under agreements between us and the underwriters, dealers and
agents.
We may grant underwriters who participate in the distribution of Securities
an option to purchase additional Securities to cover over-allotments, if any, in
connection with the distribution.
All debt securities will be new issues of securities with no established
trading market. Underwriters involved in the public offering and sale of debt
securities may make a market in the debt securities. However, they are not
obligated to make a market and may
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discontinue market making activity at any time. No assurance can be given as to
the liquidity of the trading market for any debt securities.
Underwriters or agents and their associates may be customers of, engage in
transactions with or perform services for us in the ordinary course of business.
LEGAL MATTERS
The validity of the issuance of Solectron's Securities offered by this
prospectus will be passed upon for Solectron by Wilson Sonsini Goodrich &
Rosati, Professional Corporation, Palo Alto, California.
EXPERTS
The consolidated financial statements and schedule of Solectron Corporation
as of August 31, 1998 and 1997, and for each of the years in the three-year
period ended August 31, 1998 have been incorporated by reference herein and in
the registration statement in reliance upon the report of KPMG LLP, independent
auditors, incorporated by reference herein, and upon the authority of said firm
as experts in auditing and accounting.
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