This excerpt taken from the MRVL DEF 14A filed May 8, 2006.
At the Annual General Meeting, the shareholders will be asked to approve an increase to the Companys authorized share capital. Effective as of February 21, 2006, the Board of Directors approved a bonus issue of shares to effectuate a 2-for-1 stock split in the form of a stock dividend, subject to shareholder approval of an increase in the authorized share capital of the Company.
The Company proposes to increase the authorized share capital of the Company from US$1,000,000.00 to US$2,000,000.00 by the creation of 500,000,000 additional shares of Common Stock of par value $0.002 each.
The increased authorized share capital will allow the Board to issue bonus shares to effectuate the 2-for-1 stock split in the form of a stock dividend that was approved by the Board on February 21, 2006. The Board believes the additional authorized share capital is necessary to allow the issuance of the bonus shares to effectuate the stock split. The stock split is intended to offer investors in the Companys shares enhanced liquidity in the shares and make the shares more attractive to a broader range of investors. The effect of the additional authorized shares and the subsequent bonus issue of shares will be to double the number of authorized and outstanding shares of Common Stock.
The authorized shares of Common Stock in excess of those issued in connection with the stock split will be available for issuance at such times and for such corporate purposes as the Board of Directors may deem advisable, such as to raise equity capital, to adopt additional employee benefit plans or reserve additional shares for issuance under those plans, and to make acquisitions through the use of stock.
The Board of Directors believes that the proposed increase in the Companys authorized share capital will make available sufficient shares for use, taking into account the stock split, should the Company decide to use its shares for one or more of such previously mentioned purposes or otherwise. No additional action or authorization by the Companys shareholders would be necessary prior to the issuance of these additional shares, except as may be required by applicable laws or the rules of any stock exchange or stock market on which the Common Stock may be listed or traded. The Company reserves the right to seek a further increase in authorized shares from time to time in the future as considered appropriate by the Board of Directors.
Upon issuance, the newly issued shares will have the same rights as the outstanding shares of Common Stock. Holders of Common Stock do not have preemptive rights. Thus, should the Board of Directors elect to issue additional shares of Common Stock, existing shareholders would not have any preferential rights to purchase those shares. In addition, if the Board of Directors elects to issue additional shares of Common Stock, the issuance could have a dilutive effect on the earnings per share, voting power and percentage shareholdings of current shareholders.
The Board of Directors does not recommend this proposed amendment with the intent to use the ability to issue additional Common Stock to discourage tender offers or takeover attempts. However, the availability of authorized Common Stock for issuance could render more difficult or discourage a merger, tender offer, proxy contest or other attempt to obtain control of the Company. The proposed amendment is not in response to any effort on the part of any party to accumulate material amounts of Common Stock or to acquire control of the Company by means of merger, tender offer, proxy contest or otherwise, or to change the Companys management. In addition, the proposal is not part of any plan by management to recommend a series of similar amendments to the Board of Directors and the shareholders.