exv10w1



 






EXHIBIT 10.1









PRIVATE AND CONFIDENTIAL




June 13, 2005




Mr. Ash Bhardwaj

President, Design & ODM Services

Flextronics International USA, Inc.

2090 Fortune Drive

San Jose, CA 95131



Dear Ash:



The purpose of this letter is to set forth our proposed terms for the acquisition (the
"Acquisition”) of the assets of the mixed signal, peripheral imaging components (“PIC”), and
digital businesses (the “Acquired Businesses”) of Flextronics Semiconductor, Inc. (“FSI”) from FSI
or Flextronics International USA, Inc. (“Flextronics”) by AMIS Holdings, Inc. or one of its wholly
owned subsidiaries (the “Acquiror”). This is a binding offer to acquire the Acquired Businesses on
the terms set forth below. This offer will expire at 5:00 p.m. pacific time on June 14, 2005
unless Acquiror receives a copy of this letter signed by you in the space provided below before
that time. We understand that neither FSI nor Flextronics has any obligation to accept this offer.
However, should FSI or Flextronics accept this offer by signing this letter and returning it to
Acquiror by the deadline stated above, then Acquiror, FSI and Flextronics shall be bound by the
terms of this letter.



1. Acquisition Consideration and Structure. Acquiror shall purchase from FSI or Flextronics and
FSI or Flextronics shall sell to Acquiror the assets of the Acquired Businesses for the sum of
US$135,000,000 (the “Acquisition Consideration”). This would include Acquiror’s assumption of the
Software License Agreement between FSI and Magma Design Automation, Inc., dated September 29, 2001,
as amended as of March 31, 2005. It is anticipated that the closing would occur before the end of
July 2005. The Acquisition Consideration will be in the form of cash and will be financed, at the
Acquiror’s discretion, by 1) existing cash and use of a revolving credit facility, 2) new financing
in the form of a bank loan or through the sale of a convertible bond offering, or 3) a combination
of the above. Contingencies to closing the transaction include the following: receipt of any
required governmental approvals, receipt of any required third party consents (including any
consents required under material contracts as agreed by the parties), receipt by Acquiror of
audited financial statements of the Acquired Businesses for the fiscal year ending March 31, 2005,
and agreement by Acquiror, FSI and Flextronics to the terms of an Asset









2300 Buckskin Road

Pocatello, Idaho 83201

Ph — 208-234-6935 Fax 208-234-6035








 









 








	 	 	 	 	 
	 

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Purchase Agreement which shall be negotiated in good faith by the parties. Acquiror represents
that it has obtained approval for this transaction from its Board of Directors.




2. Acquisition Consideration Assumptions.





	 	a)	 	Completion of Due Diligence. Upon signing this letter, FSI and Flextronics
shall make available to Acquiror (without redaction) the following materials, the
content of which shall not have any effect upon the Acquisition Consideration or the
contingencies to closing:






	 	(i)	 	Full and complete information as to the product
design and order pipeline for each of the Acquired Businesses, including,
but not limited to, all contracts, purchase orders, quotations, statements
of work, and other documents describing such designs and orders, and margin
in formation for each customer and product for the actual and forecasted
revenue of the Acquired Businesses.
	 
	 	(ii)	 	Copies of all material contracts and purchase
orders with suppliers to the Acquired Businesses including, but not limited
to, contracts and purchase orders with EDA tool vendors and contracts and
amendments previously withheld. This shall also include contracts between
such suppliers and Flextronics International or one or more of its
subsidiaries or related companies under which services, supplies or tools
are provided to the Acquired Businesses.
	 
	 	(iii)	 	Copies of all material contracts and other
documents relating to the intellectual property licensed by or to the
Acquired Businesses including, but not limited to, any contract(s) with
eASIC. FSI and Flextronics represent that the contract(s) with eASIC
require the written approval of eASIC prior to disclosure to Acquiror.
FSI, Flextronics and Acquiror shall work together to obtain this approval
from eASIC. The material contracts and other documents referenced herein
include any contracts with Flextronics International or one or more of its
subsidiaries or related companies relating to intellectual property used or
developed by the Acquired Businesses.
	 
	 	(iv)	 	Complete records showing the name, level, job position,
location, salary, applicable severance policy or plan (if any) and any
other information necessary to calculate the severance pay that each
employee of the Acquired Businesses would be entitled to receive if his or
her employment with FSI were to be terminated by FSI at or around the time
of closing.




 









 











	 	 	 	 	 
	 

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	 	b)	 	Transition Costs. Each party will bear its own costs associated with the
transaction and the transition. FSI and Flextronics will fully cooperate with Acquiror in
making the transition as smooth and efficient as possible.
	 
	 	c)	 	Liabilities Related to the Pre-Closing Conduct of the Business. In general,
all revenues, costs, expenses and risks related to the Acquired Businesses referable or
attributable to the period prior to the closing date shall be for the account of FSI and
Flextronics and all revenues, costs, expenses and risks related to the Acquired Businesses
referable or attributable to the period after the closing date shall be for the account of
Acquiror, provided however, that FSI and Flextronics shall indemnify Acquiror for
intellectual property infringement, environmental liabilities, customer warranty or other
claims, and employee or contractor claims that arise after the date of the Acquisition but
are based on actions occurring prior to such date. In the definitive agreement, Acquiror
and FSI and Flextronics will make customary representations and warranties to each other.
The aggregate liability of either party (absent fraud or willful misconduct) shall be
limited to 7% of the Acquisition Consideration. To secure FSI’s and Flextronics’
indemnification obligations, 3.5% of the Acquisition Consideration, will be withheld until
the first anniversary of the Closing. The indemnity shall not apply unless and until the
aggregate of damages sought exceeds $50,000 (the “Deductible”), in which event the
indemnity shall include all claims for damages, including the amounts comprising the
Deductible. Absent fraud or willful misconduct, the FSI and Flextronics representations
and warranties and related obligation to indemnify Acquiror shall terminate on the first
anniversary of the closing and Acquiror’s representations and warranties shall terminate on
the first anniversary of the closing.
	 
	 	d)	 	Working Capital Adjustment. The definitive agreements shall contain a purchase
price adjustment mechanism based on the difference between closing working capital of the
Acquired Businesses and the baseline working capital of the Acquired Businesses.
	 
	 	e)	 	The PIC Earnout. Acquiror will not assume any responsibility relating to the
PIC Earnout. Flextronics shall not make any payment of the PIC Earnout until January 2006,
and payment shall be made under terms which encourages retention of PIC employees receiving
such earnout.
	 
	 	f)	 	Material Acquisitions and Dispositions. Commencing on the date this letter is
signed by both parties, FSI and Flextronics will notify Acquiror of any planned
acquisitions or




 









 











	 	 	 	 	 
	 

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	 	 	 	dispositions of assets belonging to or used by the Acquired Businesses that are greater than
$100,000.
	 
	 	g)	 	Employee Matters. Acquiror will make employment offers to those employees of
the Acquired Businesses (as identified in the list provided to Acquiror in Duncan
Robertson’s email of May 11, 2005) that Acquiror wishes to employ following the closing of
the Acquisition (the “Offered Employees”). Acceptance of Acquiror’s offers shall not be a
contingency to closing. However, FSI and Flextronics agree to provide complete and full
cooperation with and support of Acquiror’s efforts to convince the Offered Employees to
accepted Acquiror’s offers. By mutual agreement, Flextronics shall either i) give Acquiror
a credit of $1,000,000 towards the purchase price at closing for Acquiror’s sole use in
establishing a retention bonus plan for key Offered Employees, or ii) provide incentive for
key Offered Employees to accept Acquiror’s employment offers and remain employed by
Acquiror for a minimum of one year by allowing such key employees a period of one year from
closing to exercise their options that are in the money at the date of closing under the
stock option plan of Flextronics (or its parent company) provided that such key Offered
Employees remain in Acquiror’s employ for such period. FSI and Flextronics agree that
neither they nor their parent company(ies) nor any subsidiary of their parent company(ies)
or its or their subsidiaries (collectively the “Flextronics International Companies”) shall
offer to hire or employ or actually hire or employ any employees of the Acquired Businesses
for a period of three years after the date of closing of this Acquisition, unless consent
is given by the Acquiror..
	 
	 	 	 	All of Acquiror’s offers to the Offered Employees shall be consistent with Acquiror’s
then-existing employment practices. Each Offered Employee who is employed by Acquiror
following the closing of the Acquisition will become eligible to participate in all Acquiror
employee benefit plans, to the extent that such plans exist in the country of employment,
upon the same terms and conditions (including plan eligibility requirements) as current
Acquiror employees participate in such plans. The effective date for such participation
shall be the date of the closing of the Acquisition, unless it is impractical, or not
permitted under the applicable plan, for such participation to begin on that date, in which
case such participation shall begin as soon after the closing date of the Acquisition as is
practicable.
	 
	 	 	 	As to the employees of the Acquired Businesses (as identified in the list provided to
Acquiror in Duncan Robertson’s email of May 11, 2005) that Acquiror does not make employment
offers to (the “Remaining Employees”), Acquiror will (at its sole option) either sever such
remaining employees at or after the closing or will reimburse FSI or Flextronics for the
Reimbursable Severance Costs incurred by FSI or




 









 











	 	 	 	 	 
	 

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Flextronics in severing such Remaining Employees at closing. The term “Reimbursable Severance Costs” means
those cash severance payments actually paid by Flextronics or FSI to the Remaining Employees
pursuant to any applicable Flextronics severance plans existing on the date of this letter,
but no more than would be paid under the terms of such plans as they were described in
Duncan Robertson’s email of May 11, 2005. Acquiror will receive a credit against any
Reimbursable Severance Costs in the amount of any accruals or amounts collected or set aside
for severance costs relating to any FSI employees identified in the list provided to
Acquiror in Duncan Robertson’s email of May 11, 2005 (such as, for example, amounts accrued
or set aside for employees in Israel).




Neither FSI nor Flextronics will make any material changes in employment positions, levels
or terms, including but not limited to compensation, benefits, bonus programs, or severance
plans for any employee of the Acquired Businesses without Acquiror’s written consent.


3. Due Diligence. Until the final Closing Date, Acquiror will be entitled to continue to conduct
a thorough due diligence review of FSI including without limitation site visits and interviews for
general purposes.



4. Definitive Acquisition Agreements. In addition to the Asset Purchase Agreement, which is
expected to contain terms in addition to the terms summarized above, each party (or any of its
affiliates) will conclude such other agreements which may be necessary or desirable for the
fulfillment of the parties’ intentions as set out herein or otherwise agreed. The Asset Purchase
Agreement will be governed by the laws of the State of California.



5. Disclosure. Except as may be required by applicable laws or a national securities exchange,
neither party will make any public statements or communications to the public, the press or any
third party (other than its officers, employees, accountants, attorneys and agents whose duties
require them to have access to such information) regarding the existence or proposed terms of the
transaction or this letter without the other party’s prior written consent.



6. Professional Fees; Other Fees. Each party will pay the fees of its own accountants, attorneys,
investment advisors and other professionals. Acquiror and FSI or Flextronics will share equally
any filing fees required by any governmental authority to effect the transaction (i.e., antitrust
filing fees).




 









 








	 	 	 	 	 
	 

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7. Confidentiality. The parties have entered into a confidentiality agreement concerning the
protection of the confidential information of the other party received during the negotiations
contemplated by this letter, which shall continue in full force and effect.



8. Exclusivity. Neither the Flextronics, FSI, nor its or their shareholders, nor any agent,
directly or indirectly, solicit, consider, negotiate or otherwise discuss a possible merger, sale
or other disposition of any of the assets of the Acquired Businesses with any other party, without
the prior written consent of Acquiror.



9. Preferred Supplier Status. FSI and Flextronics agree, on behalf of themselves and the
Flextronics International Companies, that commencing on closing, Acquiror shall be the preferred
supplier of peripheral imaging component products, mixed signal ASICs and FPGA conversion products
(with respect to FPGA conversion products, unless prohibited by prior contractual arrangement) to
the Flextronics International Companies for a period of 5 years and that a preferred supplier
agreement consistent with Flextronics’ procurement policies detailing the terms of such preferred
supplier arrangement, shall be negotiated and signed by the parties prior to the closing of this
Acquisition



If you are in agreement with the terms of this letter, please sign in the space provided below and
return a signed copy to me. Within 7 days of receipt of this letter signed by you, Acquiror will
pay Flextronics the sum of $5,000,000 as a deposit against the Acquisition Consideration, which sum
shall be nonrefundable unless either 1) Flextronics or FSI does not proceed with the Acquisition in
a timely manner, or 2) the completion of due diligence by Acquiror demonstrates that FSI or
Flextronics made any material misrepresentations as to the Acquired Businesses prior to the date of
this letter.




	 	 	 	 	 	 	 
	Very truly yours,
	 
	 	 
	By:/s/ CHRISTINE KING
	 

	 	Christine King
	 

	 	President and CEO





Accepted and agreed to

This 13th day of June 2005:




Flextronics International (USA), Inc. and Flextronics Semiconductor, Inc.



By: /s/ ASH BHARDWAJ

Ash Bhardwaj

President, Design & ODM Services