EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
by and among:
TOWER SEMICONDUCTOR LTD.,
an Israel company;
ARMSTRONG ACQUISITION CORP.,
a Delaware corporation; and
JAZZ TECHNOLOGIES, INC.,
a Delaware corporation
------------------------
Dated as of May 19, 2008
------------------------
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
THIS AGREEMENT AND PLAN OF MERGER AND REORGANIZATION ("AGREEMENT") is made
and entered into as of May 19, 2008, by and among: TOWER SEMICONDUCTOR LTD., an
Israel company ("PARENT"); ARMSTRONG ACQUISITION CORP., a Delaware corporation
and a wholly owned subsidiary of Parent ("MERGER SUB"); and JAZZ TECHNOLOGIES,
INC., a Delaware corporation (the "COMPANY"). Certain capitalized terms used in
this Agreement are defined in EXHIBIT A.
RECITALS
A. The respective boards of directors of Parent, Merger Sub and the Company
have each determined that it is in the best interests of their respective
corporations and shareholders or stockholders, as applicable, that Merger Sub be
merged with and into the Company upon the terms and subject to the conditions
set forth in this Agreement.
B. The board of directors of the Company has (i) determined that the Merger
(as defined in Section 1.1) is advisable and fair to, and in the best interests
of, the Company and its stockholders, (ii) approved this Agreement, the Merger
and the other transactions contemplated by this Agreement, and (iii) determined,
subject to the terms of this Agreement, to recommend that the stockholders of
the Company adopt this Agreement, all by a vote of the members of such board of
directors present at a meeting to consider and vote upon such matters.
C. The boards of directors of Parent and Merger Sub have approved this
Agreement, the Merger and the other transactions contemplated by this Agreement.
AGREEMENT
The parties to this Agreement, intending to be legally bound, agree as
follows:
SECTION 1. DESCRIPTION OF TRANSACTION
1.1 THE MERGER. Upon the terms and subject to the conditions set forth in
this Agreement, at the Effective Time (as defined in Section 1.3(b)) and in
accordance with the Delaware General Corporation Law ("DGCL"), Merger Sub shall
be merged with and into the Company (the merger of Merger Sub into the Company
being referred to as the "MERGER") and the separate corporate existence of
Merger Sub shall cease. The Company shall continue as the surviving corporation
in the Merger (the "SURVIVING CORPORATION").
1.2 EFFECT OF THE MERGER. The Merger shall have the effects set forth in
this Agreement and in the applicable provisions of the DGCL. Without limiting
the generality of the foregoing, and subject thereto, at the Effective Time all
of the assets, properties, rights, privileges, powers and franchises of the
Company and Merger Sub shall vest in the Surviving Corporation, and all of the
debts, liabilities, obligations, restrictions and duties of the Company and
Merger Sub shall become the debts, liabilities, obligations, restrictions and
duties of the Surviving Corporation.
1.3 CLOSING; EFFECTIVE TIME OF THE MERGER.
(A) The consummation of the transactions contemplated by this
Agreement (the "CLOSING") shall take place at the offices of Cooley Godward
Kronish LLP, 101 California Street, 5th Floor, San Francisco, California
(or such other place or time as Parent and the Company may jointly
designate in writing), as soon as practicable, but no later than two
business days after the satisfaction or waiver of the last of the
conditions set forth in Section 5 to be satisfied or waived (other than any
such conditions that by their nature are to be satisfied at the Closing,
but subject to the satisfaction or waiver of such conditions), unless the
parties hereto otherwise agree in writing. The date on which the Closing
actually takes place is referred to as the "CLOSING DATE."
(B) Upon the terms and subject to the provisions of this Agreement, in
order to effect the Merger, a certificate of merger satisfying the
applicable requirements of the DGCL shall be duly executed by the Company
and Merger Sub and concurrently with or as soon as practicable following
the Closing shall be filed with the Secretary of State of the State of
Delaware in accordance with the relevant provisions of the DGCL. The Merger
shall become effective at the time of the filing of such certificate of
merger with the Secretary of State of the State of Delaware or at such
later time as may be mutually determined by the parties to this Agreement
and set forth in such certificate of merger (the time as of which the
Merger becomes effective being referred to as the "EFFECTIVE TIME").
1.4 CERTIFICATE OF INCORPORATION AND BYLAWS; DIRECTORS AND OFFICERS. Unless
otherwise jointly determined by Parent and the Company in writing prior to the
Effective Time:
(A) as of the Effective Time, by virtue of the Merger and without any
action on the part of Merger Sub or the Company, the Certificate of
Incorporation of the Surviving Corporation shall be amended and restated as
of the Effective Time to conform to EXHIBIT B, until thereafter amended in
accordance with the DGCL and such Certificate of Incorporation;
(B) as of the Effective Time, by virtue of the Merger and without any
action on the part of Merger Sub or the Company, but subject to Section
4.10(a), the Bylaws of the Surviving Corporation shall be amended and
restated as of the Effective Time to conform to the Bylaws of Merger Sub as
in effect immediately prior to the Effective Time, until thereafter amended
in accordance with the DGCL, the Certificate of Incorporation of the
Surviving Corporation and such Bylaws; PROVIDED, HOWEVER, that all
references in such Bylaws to Merger Sub shall be amended to refer to "Jazz
Technologies, Inc.";
(C) the directors of the Surviving Corporation immediately after the
Effective Time shall be the respective individuals who are directors of
Merger Sub immediately prior to the Effective Time, until their respective
successors are duly elected or appointed and qualified; and
(D) the officers of the Surviving Corporation immediately after the
Effective Time shall be the respective individuals who are officers of
Merger Sub immediately prior to the Effective Time.
1.5 CONVERSION OF CAPITAL STOCK.
(A) At the Effective Time, by virtue of the Merger and without any
further action on the part of Parent, Merger Sub, the Company or any
stockholder of the Company:
(I) any shares of Company Common Stock held in the Company's
treasury or held by the Company immediately prior to the Effective
Time shall be canceled and retired and shall cease to exist, and no
consideration shall be delivered in exchange therefor;
(II) any shares of Company Common Stock held by Parent or Merger
Sub immediately prior to the Effective Time shall be canceled and
retired and shall cease to exist, and no consideration shall be
delivered in exchange therefor;
(III) except as provided in clauses "(i)" and "(ii)" above and
subject to Sections 1.5(b) and 1.5(c), each share of Company Common
Stock outstanding (including any outstanding shares of Company Common
Stock that are unvested or are subject to any repurchase rights, risk
of forfeiture or other condition in favor of the Company and any
Company Common Stock held by any direct or indirect subsidiary of
either the Parent (other than Merger Sub) or the Company) immediately
prior to the Effective Time shall be converted into the right to
receive 1.8 (the "EXCHANGE RATIO") ordinary shares, par value NIS 1.00
per share, of Parent ("PARENT ORDINARY SHARES"); and
(IV) each share of common stock, $0.001 par value per share, of
Merger Sub Ioutstanding immediately prior to the Effective Time shall
be converted into one share of common stock of the Surviving
Corporation, and each certificate evidencing ownership of shares of
Merger Sub common stock outstanding immediately prior to the Effective
Time shall evidence ownership of such shares of common stock of the
Surviving Corporation.
(B) The Exchange Ratio and any other applicable numbers or amounts
shall be adjusted to reflect appropriately the effect of any stock split,
reverse stock split, stock dividend (including any dividend or distribution
of securities convertible into or exercisable or exchangeable for Parent
Ordinary Shares or Company Common Stock), extraordinary cash dividend,
reorganization, recapitalization, reclassification, combination, exchange
of shares or other like change with respect to Parent Ordinary Shares or
Company Common Stock occurring or having a record date on or after the date
of this Agreement and prior to the Effective Time.
(C) No fraction of a Parent Ordinary Share will be issued by virtue of
the Merger, but instead each holder of shares of Company Common Stock who
would otherwise be entitled to receive a fraction of a Parent Ordinary
Share (after aggregating all fractional Parent Ordinary Shares that
otherwise would be received by such holder) shall, upon surrender of such
holder's Company Stock Certificate(s) (as defined in Section 1.6) receive
from Parent an amount of cash (rounded to the nearest whole cent), without
interest, equal to the product of (i) such fraction, multiplied by (ii) the
average closing price of one Parent Ordinary Share for the five (5) most
recent days that Parent Ordinary Shares have traded ending on the trading
day immediately prior to the Effective Time, as reported on the Nasdaq
Global Market.
1.6 NO FURTHER OWNERSHIP RIGHTS IN COMPANY COMMON STOCK; CLOSING OF THE
COMPANY'S TRANSFER BOOKS. All Parent Ordinary Shares issued in exchange for
shares of Company Common Stock in accordance with the terms hereof (including
any cash in lieu of any fractional shares pursuant to Section 1.5(c) and any
dividends or other distributions pursuant to Section 1.7(c)) shall be deemed to
have been issued in full satisfaction of all rights pertaining to such shares of
Company Common Stock. At the Effective Time: (a) all shares of Company Common
Stock outstanding immediately prior to the Effective Time shall automatically be
canceled and retired and shall cease to exist, and all holders of certificates
representing shares of Company Common Stock that were outstanding immediately
prior to the Effective Time shall cease to have any rights as stockholders of
the Company, except for (and to the extent provided in Section 1.5) the right to
receive the Parent Ordinary Shares and cash pursuant to Section 1.5 with respect
to each of the shares of Company Common Stock evidenced by such certificates;
and (b) the stock transfer books of the Company shall be closed with respect to
all shares of Company Common Stock outstanding immediately prior to the
Effective Time. No further transfer of any such shares of Company Common Stock
shall be made on such stock transfer books after the Effective Time. If, after
the Effective Time, a valid certificate previously representing any shares of
Company Common Stock outstanding immediately prior to the Effective Time (a
"COMPANY STOCK CERTIFICATE") is presented to the Exchange Agent (as defined in
Section 1.7(a)) or to the Surviving Corporation or Parent, such Company Stock
Certificate shall be canceled and shall be exchanged as provided in Section 1.7.
1.7 SURRENDER OF CERTIFICATES.
(A) Prior to the Effective Time, (i) Parent shall select a reputable
bank or trust company reasonably acceptable to the Company to act as
exchange agent with respect to the Merger (the "EXCHANGE AGENT"), and (ii)
Parent shall cause to be made available to the Exchange Agent, for exchange
in accordance with this Section 1, the Parent Ordinary Shares pursuant to
Section 1.5(a)(iii), and cash amounts sufficient for payment in lieu of
fractional shares pursuant to Section 1.5(c) and any dividends or
distributions to which holders of shares of Company Common Stock may be
entitled pursuant to Section 1.7(c). The Parent Ordinary Shares and cash
amounts so deposited with the Exchange Agent, together with any dividends
or distributions received by the Exchange Agent with respect to such
shares, are referred to collectively as the "EXCHANGE FUND."
(B) Promptly (and in any event within five (5) business days after the
Effective Time, subject to Parent and Exchange Agent receiving from the
Company and its transfer agent all reasonably required information prior to
the Effective Time), Parent shall cause the Exchange Agent to mail to each
Person who was, immediately prior to the Effective Time, a holder of record
of shares of Company Common Stock described in Section 1.5(a)(iii) a form
of letter of transmittal in customary form (which shall specify that
delivery shall be effected, and risk of loss and title to the Company Stock
Certificates shall pass, only upon delivery of the Company Stock
Certificates to the Exchange Agent and shall contain such other customary
provisions as Parent or the Exchange Agent may reasonably specify) and
instructions for use in effecting the surrender of Company Stock
Certificates previously representing such shares of Company Common Stock in
exchange for certificates representing Parent Ordinary Shares pursuant to
Section 1.5(a)(iii), cash in lieu of any fractional shares pursuant to
Section 1.5(c) and any dividends or other distributions pursuant to Section
1.7(c). Such letter of transmittal shall contain all reasonably required
tax information, including tax information regarding the record holders of
Company Common Stock, as Parent may reasonably require. Parent shall ensure
that, upon proper surrender to the Exchange Agent of each such Company
Stock Certificate, together with a properly executed letter of transmittal,
the holder of such Company Stock Certificate (or, under the circumstances
described in Section 1.7(f), the transferee of shares of Company Common
Stock previously represented by such Company Stock Certificate) shall
promptly receive in exchange therefor certificates representing the number
of whole Parent Ordinary Shares into which their shares of Company Common
Stock were converted pursuant to Section 1.5(a)(iii), payment in lieu of
fractional shares which such holders have the right to receive pursuant to
Section 1.5(c) and any dividends or other distributions payable pursuant to
Section 1.7(c).
(C) Dividends or other distributions declared or made after the date
of this Agreement with respect to Parent Ordinary Shares with a record date
after the Effective Time will be paid to the holders of any unsurrendered
Company Stock Certificates with respect to the Parent Ordinary Shares
represented thereby when the holders of record of such Company Stock
Certificates surrender such Company Stock Certificates.
(D) On or after the first anniversary of the Effective Time, the
Surviving Corporation shall be entitled to cause the Exchange Agent to
deliver to the Surviving Corporation any portion of the Exchange Fund which
has not been distributed to holders of Company Stock Certificates, and
thereafter such holders shall be entitled to look solely to Parent and the
Surviving Corporation with respect to the Parent Ordinary Shares pursuant
to Section 1.5(a)(iii), cash in lieu of any fractional shares pursuant to
Section 1.5(c) and any dividends or other distributions pursuant to Section
1.7(c). Neither the Exchange Agent, Parent, nor the Surviving Corporation
shall be liable to any holder of a Company Stock Certificate for any amount
properly paid to a public official pursuant to any applicable abandoned
property or escheat law.
(E) If any Company Stock Certificate shall have been lost, stolen or
destroyed, then, upon the making of an affidavit of that fact by the Person
claiming such Company Stock Certificate to be lost, stolen or destroyed,
Parent shall cause the Exchange Agent to issue and pay in exchange for such
lost, stolen or destroyed Company Stock Certificate the Parent Ordinary
Shares pursuant to Section 1.5(a)(iii), cash in lieu of any fractional
shares pursuant to Section 1.5(c) and any dividends or other distributions
pursuant to Section 1.7(c); PROVIDED, HOWEVER, that Parent may also, in its
commercially reasonable discretion and as an additional condition precedent
to the issuance and payment thereof, require the owner of such lost, stolen
or destroyed Company Stock Certificates to deliver a bond in such sum as it
may reasonably direct, in accordance with the Exchange Agent's customary
policies, against Parent, the Surviving Corporation or the Exchange Agent
with respect to the Company Stock Certificates alleged to have been lost,
stolen or destroyed.
(F) If certificates representing Parent Ordinary Shares are to be
issued in a name other than that in which the Company Stock Certificates
surrendered in exchange therefor are registered, it will be a condition of
the issuance thereof that the Company Stock Certificates so surrendered
will be properly endorsed and otherwise in proper form for transfer and
that the Persons requesting such exchange will have (i) paid to Parent or
any agent designated by it any transfer or other taxes required by reason
of the issuance of certificates representing Parent Ordinary Shares in any
name other than that of the registered holder of the Company Stock
Certificates surrendered, or (ii) established to the reasonable
satisfaction of Parent or any agent designated by it that such tax has been
paid or is not payable.
(G) The Surviving Corporation shall bear and pay all charges and
expenses, including those of the Exchange Agent, incurred in connection
with the exchange of Company Common Stock for Parent Ordinary Shares
(including any cash in lieu of any fractional shares pursuant to Section
1.5(c) and any dividends or other distributions pursuant to Section
1.7(c)).
1.8 COMPANY OPTIONS; RESTRICTED STOCK; WARRANTS.
(A) COMPANY OPTIONS. At the Effective Time, each Company Option shall
be assumed by Parent in accordance with Section 4.9(a).
(B) COMPANY WARRANTS. At the Effective Time, each unexercised Company
Warrant outstanding immediately prior to the Effective Time shall be
assumed by Parent in accordance with Section 4.9(b).
(C) RESTRICTED STOCK. If there are any outstanding shares of Company
Common Stock that are unvested or are subject to any repurchase rights,
risk of forfeiture or other condition in favor of the Company immediately
prior to the Effective Time, then the Parent Ordinary Shares issued in
exchange for such shares of Company Common Stock shall also be unvested and
subject to the same repurchase option, risk of forfeiture or other
condition (including any requirement that any unvested shares be held in
escrow), and the certificate representing such Parent Ordinary Shares may
accordingly be marked with appropriate legends in the discretion of Parent.
1.9 WITHHOLDING. Each of the Exchange Agent, Parent, the Company and the
Surviving Corporation shall be entitled to deduct and withhold from any
consideration payable or otherwise deliverable pursuant to this Section 1 to any
holder or former holder of Company Common Stock such amounts as the Exchange
Agent, Parent, the Company or the Surviving Corporation is required to deduct
and withhold from such consideration under the Code or any corresponding
provision of applicable state, local or foreign tax law or under any applicable
Legal Requirement. Each of the Exchange Agent, Parent, the Company and the
Surviving Corporation shall take all action that may be necessary to ensure that
any such amounts so deducted and withheld are timely and properly remitted to
the appropriate tax authority. To the extent such amounts are so deducted and
withheld, such amounts shall be treated for all purposes under this Agreement as
having been paid to the Person to whom such amounts would otherwise have been
paid.
1.10 CERTAIN TAX MATTERS.
(A) For United States federal income tax purposes, the Merger is
intended to constitute a reorganization within the meaning of Section
368(a) of the Code and a transaction that is not subject to Section
367(a)(1) of the Code. The parties to this Agreement hereby adopt this
Agreement as a "plan of reorganization" within the meaning of Sections
1.368-2(g) and 1.368-3(a) of the United States Treasury Regulations.
(B) Notwithstanding any provision of this Agreement, Parent will not
assume, or be responsible for, any federal, state, local or foreign income
tax of any Company stockholder; provided however, that Parent shall assume
and be responsible for any stock transfer or similar Tax on the issuance or
registration of Parent Ordinary Shares imposed by any United States or
Israeli tax authority whether or not such Tax is imposed on a Company
stockholder or some other person.
1.11 FURTHER ACTION. If, at any time after the Effective Time, any further
action is necessary to carry out the purposes of this Agreement or to vest the
Surviving Corporation with full right, title and possession to all assets,
property, rights, privileges, powers and franchises of the Company and Merger
Sub, the officers and directors of the Surviving Corporation and Parent shall be
fully authorized (in the name of Merger Sub, in the name of the Company or
otherwise) to take all such action.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Merger Sub that, except
as set forth in the disclosure schedule delivered to Parent on the date of this
Agreement (the "COMPANY DISCLOSURE SCHEDULE"):
2.1 DUE ORGANIZATION AND GOOD STANDING; SUBSIDIARIES.
(A) Each of the Company and the Designated Subsidiaries is a
corporation or limited liability company duly organized, validly existing
and (where such concept is recognized under the laws of the jurisdiction in
which it is incorporated) in good standing under the laws of the
jurisdiction in which it is organized, and has all requisite corporate or
limited liability company power and authority necessary to: (i) carry on
its business as it is now being conducted; and (ii) perform its obligations
under all contracts to which it is a party or under which it has rights
and/or obligations. The Company and each of the Designated Subsidiaries is
duly qualified or licensed to do business and is in good standing in each
state or foreign jurisdiction in which the nature of the business conducted
by it makes such qualification or licensing necessary, except where the
failure to be so qualified or licensed would not have a Material Adverse
Effect on the Company. Neither the Company nor any Designated Subsidiary
has agreed or is obligated to make or may become obligated to make, any
future investment in or capital contribution in any other Entity.
(B) Part 2.1 of the Company Disclosure Schedule lists all Subsidiaries
of the Company, together with the jurisdiction and form of organization of
each such Subsidiary. As of the date of this Agreement, the aggregate
dollar amount of the assets of each Subsidiary of the Company that is not a
Designated Subsidiary, determined in accordance with GAAP, is less than 1%
of the aggregate dollar amount of the consolidated assets of the Company
and its Subsidiaries, determined in accordance with GAAP. For fiscal year
2007, the pre-tax operating income of each Subsidiary of the Company that
is not a Designated Subsidiary, determined in accordance with GAAP, was
less than 1% of the aggregate dollar amount of the consolidated pre-tax
operating income of the Company and its Subsidiaries, determined in
accordance with GAAP. All of the outstanding shares of capital stock or
membership interests, as the case may be, of each Designated Subsidiary are
owned directly or indirectly by the Company free and clear of all
Encumbrances.
2.2 CERTIFICATE OF INCORPORATION; BYLAWS. The Company has made available to
Parent or Parent's legal advisor: (i) copies of the Organizational Documents of
the Company and each Designated Subsidiary, including all amendments thereto;
(ii) the stock or other equity records of the Company and each Designated
Subsidiary; and (iii) except as set forth in Part 2.2 of the Company Disclosure
Schedule, the minutes and other records as of the date of this Agreement of the
meetings at which formal actions were taken or any actions taken by written
consent without a meeting of the stockholders of the Company, the board of
directors of the Company and all committees of the board of directors of the
Company. Except as set forth in Part 2.2 of the Company Disclosure Schedule, the
stock or other equity records of the Company are accurate, up-to-date and
complete in all material respects. Neither the Company nor any Designated
Subsidiary is in violation of its Organizational Documents.
2.3 CAPITALIZATION, ETC.
(A) The authorized capital stock of the Company consists of
200,000,000 shares of Company Common Stock and 1,000,000 shares of
preferred stock ("PREFERRED SHARES"). As of 5:00 p.m. Pacific Time on May
15, 2008: (i) 19,031,276 shares of Company Common Stock were issued and
outstanding (including shares of Company Common Stock included in the
Company Units), of which no shares were unvested or were subject to any
repurchase rights, risk of forfeiture or other similar condition in favor
of the Company; (ii) no Preferred Shares were issued or outstanding; (iii)
33,033,013 shares of Company Common Stock were issuable upon exercise of
Company Warrants that were issued and outstanding (including shares of
Company Common Stock issuable upon exercise of Company Warrants included in
the Company Units); (iii) 3,108,618 shares of Company Common Stock were
issuable upon exercise of options issued pursuant to the Company Equity
Plan; and (iv) 17,489,813 shares of Company Common Stock were issuable upon
conversion of $128,200,000 aggregate principal amount of Convertible Notes.
As of 5:00 p.m. Pacific Time on May 15, 2008, 2,064,090 Company Units were
outstanding (which Company Units are included in the totals above). Between
5:00 p.m. Pacific Time on May 15, 2008 and the date of this Agreement, the
Company has not issued any shares of Company Common Stock except upon
exercise of outstanding Company Options or Company Warrants or conversion
of outstanding Convertible Notes in accordance with their terms. As of the
date of this Agreement, 4,366,544 shares of Company Common Stock were
reserved for future issuance pursuant to the Company Equity Plan. The
Company has made available to Parent or Parent's legal advisor copies of
(A) the Company Equity Plan, which covers the stock options and restricted
stock awards granted by the Company that are outstanding as of the date of
this Agreement, and (B) the forms of all stock option agreements and
restricted stock award agreements evidencing such options and stock awards.
(B) All the outstanding shares of capital stock of the Company and
each Designated Subsidiary have been duly authorized and validly issued and
are fully paid and nonassessable.
(C) Except as set forth in Part 2.3(c) of the Company Disclosure
Schedule: (i) none of the outstanding shares of capital stock of the
Company and the Designated Subsidiaries is entitled or subject to any
preemptive right or right of participation; (ii) none of the outstanding
shares of the capital stock of the Company and the Designated Subsidiaries
is subject to any right of first refusal or similar right in favor of the
Company; and (iii) there is no agreement in place relating to the voting or
registration of, or restricting any Person from purchasing, selling,
pledging or otherwise disposing of (or granting any option or similar right
with respect to), any shares of the capital stock of the Company or the
Designated Subsidiaries.
(D) Part 2.3(d) of the Company Disclosure Schedule accurately sets
forth with respect to each outstanding Company Option under the Company
Equity Plan as of 5:00 p.m. Pacific Time on May 5, 2008: (i) the name of
the holder; (ii) the exercise price per share; (iii) the total number of
shares subject to such Company Option; (iv) the date on which such Company
Option was granted; (v) the applicable vesting schedule; and (vi) whether
such Company Option is intended to qualify as an "incentive stock option"
within the meaning of Section 422 of the Code. Between 5:00 p.m. Pacific
Time on May 5, 2008 and the date of this Agreement: (i) the Company has not
granted any Company Options; (ii) no outstanding Company Option has been
amended, modified or changed; and (iii) Part 2.3(d) of the Company
Disclosure Schedule shall have only changed to the extent that outstanding
Company Options have been exercised in accordance with their terms. All
Company Options (including those that have been exercised, terminated,
expired, forfeited or otherwise cancelled) were issued at a strike price at
least equal to fair market value such that the fair market value on the
grant date equaled or exceeded the fair market value on the financial
measurement date for each such Company Option or, with respect to Company
Options that were not issued in such a manner, the Company recorded an
appropriate compensation charge in its financial statements relating to
such grants in the appropriate period and reported such in its financial
statements and Company Returns during the required period.
(E) Except for options, rights, securities and plans referred to in
Section 2.3(a) and except as set forth in Part 2.3(d) of the Company
Disclosure Schedule, as of the date of this Agreement, there is no: (i)
outstanding subscription, option, call, warrant or stock appreciation right
or other right (whether or not currently exercisable) to acquire any shares
of the capital stock or other securities of the Company or any Subsidiary
of the Company; (ii) outstanding restricted stock award, restricted stock
unit award, performance stock award or performance cash award; (iii)
outstanding security, instrument or obligation that is or would reasonably
be expected to become convertible into or exchangeable for any shares of
the capital stock or other securities of the Company or any Subsidiary of
the Company; (iv) contract under which the Company or any Subsidiary of the
Company is or may become obligated to sell or otherwise issue any shares of
its capital stock or any other securities; or (v) to the Knowledge of the
Company, condition or circumstance that would reasonably be expected to
provide a basis for the assertion of a valid claim by any Person to the
effect that such Person is entitled to acquire or receive any capital stock
of the Company or other securities of the Company.
(F) All outstanding shares of capital stock, options, warrants, stock
appreciation rights and other securities or equity interests of the Company
and the Designated Subsidiaries have been issued and granted in compliance
in all material respects with all applicable securities laws and other
applicable Legal Requirements.
(G) All of the outstanding membership interests or other equity
interests of each of the Company's Subsidiaries: (i) have been duly
authorized and validly issued; (ii) are nonassessable and free of
preemptive rights, with no obligation to contribute additional capital; and
(iii) except as set forth in Part 2.3(g) of the Company Disclosure
Schedule, are owned beneficially and of record by the Company, free and
clear of any Encumbrances (other than Permitted Encumbrances).
2.4 SEC FILINGS; FINANCIAL STATEMENTS; ABSENCE OF LIABILITIES; FINANCIAL
CONTROLS.
(A) All registration statements (on a form other than Form S-8),
annual and quarterly reports and definitive proxy statements required to be
filed by the Company with the SEC between March 13, 2006 and the date of
this Agreement (the "COMPANY SEC DOCUMENTS") have been so filed. As of the
time it was filed with the SEC (or, if amended or superseded by a filing,
then on the date of such filing): (i) each of the Company SEC Documents
complied in all material respects with the applicable requirements of the
Securities Act or the Exchange Act (as the case may be); and (ii) none of
the Company SEC Documents contained any untrue statement of a material fact
or omitted to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(B) The financial statements (including any related notes) contained
in the Company SEC Documents, including the unaudited consolidated balance
sheet of the Company and its consolidated Subsidiaries as of March 31, 2008
and the related unaudited consolidated statement of income, statement of
stockholders' equity and statement of cash flows of the Company and its
consolidated Subsidiaries for the quarter then ended, together with the
notes thereto (the "UNAUDITED INTERIM FINANCIALS"), were prepared in
accordance with GAAP applied on a consistent basis throughout the periods
covered (except as may be indicated in the notes to such financial
statements or, in the case of unaudited statements, as permitted by Form
10-Q of the SEC) and fairly present, in all material respects, the
consolidated financial position of the Company and its Subsidiaries as of
the respective dates thereof and the consolidated results of operations of
the Company and its Subsidiaries for the periods covered thereby (except
that unaudited financial statements may not contain footnotes and are
subject to year-end adjustments, which are not reasonably expected to be,
individually or in the aggregate, material in magnitude).
(C) Neither the Company nor any of its Subsidiaries has any
liabilities of the type required to be disclosed in the liabilities column
of a balance sheet prepared in accordance with GAAP, except for: (i)
liabilities disclosed in the financial statements (including any related
notes) contained in the Company SEC Documents and the Unaudited Interim
Financials; (ii) liabilities incurred since March 28, 2008 and in the
ordinary course of business, (iii) liabilities and obligations incurred in
connection with the Company's performance of its obligations under this
Agreement and the transactions contemplated hereby, (iv) liabilities
described in Part 2.4(c) of the Company Disclosure Schedule; and (v)
liabilities incurred on or following the date of this Agreement to the
extent such liabilities were permitted to be incurred under Section 4.1(b)
hereof or incurred with Parent's consent.
(D) Since January 1, 2005, neither the Company nor any Designated
Subsidiary has effected or maintained any "off-balance sheet arrangement"
(as defined in Item 303(c) of Regulation S-K of the SEC).
(E) The Company and the Designated Subsidiaries maintain adequate
internal accounting controls that are reasonably sufficient to provide
reasonable assurance that: (i) transactions are executed only with
management's general or specific authorization; (ii) transactions are
recorded as necessary to permit preparation of the consolidated financial
statements of the Company and its consolidated Subsidiaries in accordance
with GAAP and to maintain accountability for the assets of the Company and
the Designated Subsidiaries; (iii) access to the assets of the Company and
the Designated Subsidiaries is permitted only in accordance with
management's general or specific authorization; (iv) the recorded
accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences; and (v) the unauthorized acquisition, use or disposition of
the Company's assets that could materially affect the Company's financial
statements are prevented or detected in a timely manner.
(F) The Company's "disclosure controls and procedures" (as such terms
are defined in paragraph (e) of Rule 13a-15 under the Exchange Act) are
reasonably designed to ensure that material information required to be
disclosed by the Company in its reports that it files or furnishes under
the Exchange Act is recorded, processed, summarized and reported within the
time period specified in the rules and forms of the Commission, and that
all such material information is accumulated and communicated to the
Company's management as appropriate to allow timely decisions regarding
required disclosure and to make the certifications of the principal
executive officer and principal financial officer of the Company required
under the Exchange Act with respect to such reports.
(G) The Company's management has completed assessment of the
effectiveness of the Company's internal control over financial reporting in
compliance with the requirements of Section 404 of the Sarbanes-Oxley Act
of 2002, and the rules and regulations promulgated thereunder (the
"SARBANES-OXLEY ACT"), for the year ended December 28, 2007, and such
assessment concluded that such controls were effective. The Company has
made available to Parent or Parent's legal advisor any material
communication made by management or the Company's auditors prior to the
date of this Agreement to the audit committee required or contemplated by
listing standards of the American Stock Exchange, the audit committee's
charter or professional standards of the Public Company Accounting
Oversight Board. As of the date of this Agreement, no material complaints
from any source regarding accounting, internal accounting controls or
auditing matters, and no material concerns from Company or Subsidiary of
the Company employees regarding questionable accounting or auditing
matters, have been received by the Company. No attorney representing the
Company or any of its Subsidiaries, whether or not employed by the Company
or any of its Subsidiaries, has reported evidence of a violation of
securities laws by the Company, any Subsidiary of the Company or any of its
officers, directors, employees or agents to the Company's chief legal
officer, audit committee (or other committee designated for the purpose) of
the Company's board of directors or the Company's board of directors.
(H) The Company is in compliance in all material respects with the
applicable provisions of the Sarbanes-Oxley Act, and with applicable
listing and other rules and regulations of the American Stock Exchange and
has not received any notice from the American Stock Exchange asserting any
non-compliance with such rules and regulations. Each of the principal
executive officer of the Company and the principal financial officer of the
Company has made all certifications required by Rule 13a-14 or 15d-14 under
the Exchange Act and Sections 302 and 906 of the Sarbanes-Oxley Act with
respect to the Company SEC Documents, and the statements contained in such
certifications are accurate in all material respects. For purposes of this
Agreement, "principal executive officer" and "principal financial officer"
shall have the meanings given to such terms in the Sarbanes-Oxley Act.
Neither the Company nor any of its subsidiaries has outstanding, or has
arranged any outstanding, "extensions of credit", including in the form a
personal loan to directors or executive officers within the meaning of
Section 13(k) of the Exchange Act.
2.5 ABSENCE OF CERTAIN CHANGES. Between December 28, 2007 and the date of
this Agreement, neither the Company nor any of the Designated Subsidiaries has:
(a) suffered any adverse change with respect to its business, customers,
suppliers or financial condition which has had a Material Adverse Effect on the
Company; (b) suffered any loss, damage or destruction to, or interruption in use
of, any of its material assets; (c) amended its Organizational Documents, or
effected or been a party to (other than as a stockholder) any recapitalization,
reclassification of shares, stock split, reverse stock split or similar
transaction; (d) lent money to any Person (other than advances made to
employees, directors or agents for business expenses and loans made to employees
to acquire shares of Company Common Stock upon exercise of Company Options, each
in the ordinary course of business and consistent with past practice); (e)
incurred any indebtedness for borrowed money or guaranteed any such indebtedness
involving more than $100,000 in the aggregate; (f) changed, in any material
respect, its accounting methods, principles or practices except as required by
changes in GAAP; (g) (i) acquired any asset (tangible or intangible), or group
of related assets, for a purchase price exceeding $250,000 (other than the
acquisition of raw materials or supplies in the ordinary course of business
consistent with past practice or capital expenditures not prohibited by Section
4.1(b)(xvii), or (ii) sold or otherwise transferred or otherwise disposed of any
material asset (including, without limitation, any fixed asset with a purchase
price, at the time it was originally purchased, greater than $100,000 and the
membership interest (all or a portion) in Shanghai Hau Hong Nec Electronics
Company, Ltd. ("HHNEC")) (other than the sale of finished goods inventory in the
ordinary course of business, scrapped inventory and the disposal of obsolete
equipment consistent with past practice), or (iii) entered into a license or
lease for any asset involving the payment of, or the receipt of, payments
greater than $100,000 in any twelve month period or $200,000 over the term of
the license or lease; (h) declared, set aside or paid any dividend or made any
other distribution with respect to the outstanding shares of Company Common
Stock or repurchased or redeemed any shares of Company Common Stock, Company
Warrants, Convertible Notes or other securities; (i) acquired any equity
interest or voting interest in any Entity (other than a Subsidiary disclosed in
Part 2.1 of the Company Disclosure Schedule); (j) made any capital expenditure
which, when added to all other capital expenditures made on behalf of the
Company and it Subsidiaries between December 28, 2007 and the date of this
Agreement, exceeds an aggregate of $2,500,000; (k) written off as uncollectible,
or established any extraordinary reserve with respect to, any account receivable
or other indebtedness in an amount that is individually greater than $100,000 or
in the aggregate greater than $400,000; (l) made any pledge of any of its assets
or otherwise permitted any of its assets to become subject to any Encumbrance,
except for Permitted Encumbrances; (m) (i) granted any Stock Award (as such term
is defined in the Company Equity Plan) or similar award or (ii) established or
adopted any employee benefit plan, paid any bonus or made any profit sharing or
similar payment to, or increased the amount of the wages, salary, commissions,
fringe benefits or other compensation or remuneration payable to, any of its
directors, officers or employees (other than payments or increases required
pursuant to a Labor Agreement (as defined below), any employee benefit plan or
any employment agreement as in effect on the date hereof and salary increases
and bonus payments for non-executive employees in the ordinary course of
business consistent with past practice both in terms of timing and amount), or
hired any new officer or any new employee whose annual base compensation is
greater than $100,000; (n) made any material tax election; (o) commenced or
settled any Legal Proceeding (i) involving damages for greater than $100,000,
(ii) involving the payment of more than $100,000, or (iii) seeking specific
performance or injunctive relief; (p) received a written claim by a third party
in which the commencement of a Legal Proceeding is threatened; or (q) entered
into any binding agreement to take any of the actions referred to in clauses
"(c)" through "(p)" of this sentence.
2.6 IP RIGHTS.
(A) Part 2.6(a) of the Company Disclosure Schedule accurately
identifies as of the date of this Agreement:
(I) In Part 2.6(a)(i) of the Company Disclosure Schedule: (A)
each item of Registered IP in which the Company or any of its
Subsidiaries has an ownership interest of any nature (whether
exclusively, jointly with another Person or otherwise); (B) the
jurisdiction in which such item of Registered IP has been registered
or filed and the applicable registration or serial number; and (C) any
other Person that has an ownership interest in such item of Registered
IP and the nature of such ownership interest;
(II) in Part 2.6(a)(ii) of the Company Disclosure Schedule: (A)
all Intellectual Property Rights or Intellectual Property licensed to
the Company or any of its Subsidiaries (other than any non-customized
software (including shrink-wrap, off-the-shelf or commercially
available software), that: (1) is so licensed in executable or object
code form pursuant to a nonexclusive software license, (2) is used by
the Company and its Subsidiaries for administrative, financial, or
other non-operational purposes; and (3) is generally available on
standard terms for less than $10,000 per month or less than $120,000
per year); and (B) the corresponding contract or contracts pursuant to
which such Intellectual Property Rights or Intellectual Property are
licensed; and
(III) in Part 2.6(a)(iii) of the Company Disclosure Schedule,
each written contract under which a license or similar right (other
than an ownership interest) is held by any third party in or to any of
the Company Owned IP (other than nonexclusive licenses granted to
customers in the ordinary course of business).
Complete and accurate copies of each contract identified in Part 2.6(a)(ii) or
Part 2.6(a)(iii) of the Company Disclosure Schedule have been made available to
Parent or Parent's legal advisor. Except for any exclusive licenses granted to
third parties in or to the Company Owned IP, no material Company Owned IP is
subject to any contract containing any covenant or other provision that limits
or restricts the ability of the Company or any of its Subsidiaries to use,
exploit, assert, or enforce any Company Owned IP anywhere in the world in a
manner that would reasonably be expected to materially and adversely impact the
business of the Company and its Subsidiaries as currently conducted.
(IV) Part 2.6(a)(iv) of the Company Disclosure Schedule
accurately identifies, as of the date of this Agreement, each written
contract pursuant to which any material Intellectual Property was
developed by the Company or any Subsidiary of the Company or by a
third party, where the terms of such contract expressly contemplate
(A) the development of any Intellectual Property by such third party,
where the Company or Subsidiary owns the resulting Intellectual
Property and Intellectual Property Rights as Company Owned IP
(excluding employee proprietary inventions and assignment agreements
and any agreements pursuant to which a individual consultant or
independent contractor performed services on a full-time basis on
behalf of the Company or Subsidiary while onsite at the Company or
Subsidiary facilities); (B) the development of any Intellectual
Property by the Company or any Subsidiary of the Company on behalf of
such third party, where the third party exclusively or jointly owns
the resulting Intellectual Property; or (C) the collaborative
development of Intellectual Property by the Company or any Subsidiary
of the Company and such third party, such as (1) development to allow
such third party to offer their design Intellectual Property
commercially, (2) customer support process or design modifications or
(3) education research development, other than those agreements
already disclosed in response to (a) or (b) above.
(B) The Company and its Subsidiaries exclusively own all right, title
and interest to and in the Company Owned IP (other than Registered IP
identified in Part 2.6(a)(i) of the Company Disclosure Schedule as being
subject to the ownership interest of another Person) free and clear of any
Encumbrances (other than Permitted Encumbrances and other than nonexclusive
licenses granted pursuant to the contracts listed in Part 2.6(a)(iii) of
the Company Disclosure Schedule). Without limiting the generality of the
foregoing:
(I) all documents and instruments necessary to perfect the rights
of the Company and its Subsidiaries in the Company Owned IP that is
Registered IP have been validly executed, delivered and filed (on or
before any applicable deadline) with the appropriate Governmental
Entity;
(II) each Person who is or was an employee, consultant or
independent contractor of the Company or any of its Subsidiaries and
who is or was involved in the creation or development of any
Intellectual Property intended to be Company Owned IP, or who is or
was named as an inventor on any patent application filed or owned by
the Company or any of its Subsidiaries, has signed one or more
agreements containing an assignment of that Person's Intellectual
Property Rights to the Company or one of its Subsidiaries and
confidentiality provisions protecting the Company Owned IP;
(III) no past or current employee, consultant or independent
contractor of the Company or any of its Subsidiaries has any claim,
right (whether or not currently exercisable) or interest to or in any
Company Owned IP;
(IV) to the Knowledge of the Company, no employee, consultant or
independent contractor of the Company or any of its Subsidiaries is in
breach of any contract with any former employer or other Person
concerning Intellectual Property Rights or confidentiality where the
cause or nature of the breach arises out of any services, including
the development of any Company Owned IP, performed by such employee,
consultant or independent contractor for the Company or any of its
Subsidiaries;
(V) no funding, facilities or personnel of any Governmental
Entity or any university or other educational institution were used to
develop or create, in whole or in part, any Company Owned IP;
(VI) each of the Company and its Subsidiaries has taken
reasonable steps to maintain the confidentiality of and otherwise
protect and enforce its rights in all proprietary information held or
purported to be held as a trade secret by such Company or Subsidiary;
(VII) in the two (2) year period prior to the date of this
Agreement, neither the Company nor any of its Subsidiaries has
assigned or otherwise transferred ownership of, or agreed to assign or
otherwise transfer ownership of, any material Company Owned IP to any
other Person; and
(VIII) except for any Process Technology expressly identified as
being licensed from third parties in Part 2.6(b)(viii) of the Company
Disclosure Schedule, the Company and its Subsidiaries exclusively own
all right, title, and interest in and to all Process Technology used
in the conduct of the business as currently conducted.
(C) To the Knowledge of the Company, all material Intellectual
Property and Intellectual Property Rights necessary to conduct the business
of the Company and its Subsidiaries as currently conducted are (A)
exclusively owned by the Company and its Subsidiaries, (B) licensed to the
Company and its Subsidiaries or (C) otherwise in the possession or control
of the Company (or any of its Subsidiaries) subject to the Company's (or
any of its Subsidiaries') lawful right to either use such Intellectual
Property or exercise such Intellectual Property Rights, as applicable, in
each case to the extent necessary to conduct the business of the Company
and its Subsidiaries as currently conducted, which right may have been
acquired by means of an express or implied license; the application of the
doctrine of fair use, patent exhaustion, first sale, or any other similar
legal doctrine in any jurisdiction worldwide; the entry of such
Intellectual Property into the public domain; joint ownership; a
covenant-not-to-assert; or any other right, immunity, or privilege arising
under applicable law. The parties acknowledge and agree that the foregoing
statement does not constitute a representation or warranty as to, and is
not intended to apply to, any potential, actual or suspected infringement,
misappropriation or violation of any Intellectual Property Right of any
other Person by the Company or any of its Subsidiaries.
(D) To the Knowledge of the Company, (A) all Company Owned IP that is
material Registered IP (other than pending applications for Registered IP)
is valid in all material respects; and (B) all Company Owned IP that
consists of a material copyright (whether registered or unregistered) is
valid and subsisting in all material respects. Without limiting the
generality of the foregoing:
(I) no registered trademark or service mark owned by the Company
or any of its Subsidiaries, and no other trademark or service mark
currently being used by the Company or any of its Subsidiaries in the
ordinary course of business (collectively, "COMPANY TRADEMARKS"),
conflicts with any registered trademark of any other Person in any
jurisdiction where the Company or any of its Subsidiaries currently
markets or promotes (directly or through any Person who is authorized
by the Company or any of its Subsidiaries to so market and promote)
any of their products or services through the use of the Company
Trademarks, where as a result of such conflict, the Company and its
Subsidiaries would not be able to use such Company Trademarks in such
jurisdiction;
(II) except for the Registered IP listed in Part 2.6(d)(ii) of
the Company Disclosure Schedule, which the Company or its Subsidiaries
has elected to abandon as of the date of this Agreement or may elect
to abandon following the date of this Agreement in accordance with
Section 4.1(b)(xiii), each item of Company Owned IP that is Registered
IP is in compliance with all Legal Requirements, and all filings,
payments and other actions required to be made or taken to maintain
each item of material Company Owned IP that is Registered IP in full
force and effect have been made by the applicable deadline;
(III) all applications, material correspondence and other
material documents related to each such item of Registered IP
referenced in subsection (d)(ii) above provided or made available to
Parent or its legal advisors are complete and accurate; and
(IV) no interference, opposition, reissue, reexamination or other
Legal Proceeding of any nature is pending or, to the Knowledge of the
Company, threatened, in which the scope, validity or enforceability of
any Company Owned IP is being, has been or is expected to be contested
or challenged.
(E) Neither the execution, delivery or performance by the Company of
this Agreement, nor the consummation by the Company of any of the
transactions contemplated by this Agreement, will, with or without notice
or the lapse of time, give any other Person the right or option to cause:
(i) a loss of, or Encumbrance on, any Company Owned IP; (ii) the release,
disclosure or delivery of any Company Owned IP by any escrow agent to any
other Person; or (iii) the grant, assignment or transfer to any other
Person of any license or other material right or interest, such as an
ownership interest or covenant-not-to-sue, under, in or to any material
Company Owned IP.
(F) To the Knowledge of the Company, since March 12, 2002, no Person
has infringed, misappropriated, or otherwise violated any Company Owned IP,
and (ii) no Person is currently infringing, misappropriating or otherwise
violating, any Company Owned IP.
(G) (A) To the Knowledge of the Company, since March 12, 2002, neither
the Company nor any of its Subsidiaries, has infringed (directly,
contributorily, by inducement or otherwise), misappropriated or otherwise
violated any Intellectual Property Right (including patent rights) of any
other Person; and (B) to the Knowledge of the Company, neither the Company
nor any of its Subsidiaries is infringing (directly, contributorily, by
inducement or otherwise), misappropriating or otherwise violating any
Intellectual Property Right of any other Person. Without limiting the
generality of the foregoing:
(I) no infringement, misappropriation or similar Legal Proceeding
is pending or, to the Knowledge of the Company, threatened against the
Company or any of its Subsidiaries or against any other Person who, as
a party to one of the contracts listed in Part 2.6(a)(iii) of the
Company Disclosure Schedule, may be entitled to be indemnified,
defended, held harmless or reimbursed by the Company or any of the
Designated Subsidiaries with respect to such Legal Proceeding;
(II) in the two (2) year period prior to the date of this
Agreement neither the Company nor any of its Subsidiaries has received
any written notice alleging infringement, misappropriation or
violation by the Company or any of its Subsidiaries or any of their
employees, consultants, or independent contractors, of any
Intellectual Property Right of another Person;
(III) neither the Company nor any Subsidiary of the Company is
bound by any contract to indemnify, hold harmless or reimburse any
other Person with respect to, or has assumed, pursuant to any
contract, any existing or potential liability of another Person for,
any intellectual property infringement, misappropriation or similar
claim (other than any obligation entered into in the ordinary course
of business that (A) requires the Company or such Subsidiary to
indemnify a wafer fabrication customer against third-party claims
alleging that the Process Technology infringes a third-party
Intellectual Property Right, and (B) is limited to an aggregate
liability that does not exceed the total consideration paid or payable
by such customer to the Company or such Subsidiary, and other than
pursuant to any express indemnification provisions in contracts
identified in Part 2.6(g) of the Company Disclosure Schedule); and
(IV) to the Knowledge of the Company, no Legal Proceeding
involving any Intellectual Property Right licensed to the Company or
any of the Designated Subsidiaries pursuant to a contract identified
in Part 2.6(a)(ii) of the Company Disclosure Schedule is pending,
except for any such Legal Proceeding that would not reasonably be
expected to have a material and adverse affect on the use or
exploitation of such Intellectual Property Right by the Company or any
of its Subsidiaries.
(H) No source code for any Company Software has been delivered,
licensed or made available to any escrow agent or other third party and
neither the Company or any of its Subsidiaries has, as of the date of this
Agreement, any duty or obligation (whether present, contingent or
otherwise) to deliver, license or make available the source code for any
Company Software to any escrow agent or other third party. No event has
occurred, and no circumstance or condition exists, that (with or without
notice or lapse of time) will, or would reasonably be expected to, result
in the release of any source code for any Company Software from any escrow
agent or other third party to any other Person who is not, as of the date
of this Agreement, an employee, consultant or independent contractor of the
Company or any of its Subsidiaries (except for licenses to the source code
for any Company Software licensed to third parties in the ordinary course
of business).
(I) The Company has paid in full, on or before the due date, all
amounts owed pursuant to the cross-license agreement identified in Part
2.6(a)(ii) and Part 2.6(a)(iii) of the Company Disclosure Schedule, other
than payments that are not yet due.
(J) No Company Software has been or is being distributed, in whole or
in part, or was used, or is being used in conjunction with any Open Source
Software under an Open Source License in a manner which would require that
such Company Software (excluding the original Open Source Software) be
disclosed or distributed in source code form or made available at no
charge.
(K) Neither the Company nor any of its Subsidiaries has contributed or
licensed, or agreed to contribute or license, any Company Owned IP to or
through any standards body, standard setting organization, industry
consortium, licensing pool, governmental entity, or other industry group or
consortium (each, a "STANDARDS BODY"). Neither the Company nor any of its
Subsidiaries is a member of any Standards Body and has not participated in
the development or approval of any standards or specifications proposed or
established by any Standards Body. Neither the Company nor any of its
Subsidiaries has agreed to dedicate any Company Owned IP to the public, or
to make generally available in connection with any Standards Body any
licenses to any Company Owned IP (1) on a royalty free basis, or (2) on
fair, reasonable and non-discriminatory terms.
2.7 TITLE TO ASSETS; REAL PROPERTY; EQUIPMENT; LEASEHOLDS.
(A) The Company or one of its Subsidiaries owns, and has good title
to, or in the case of assets purported to be leased by the Company or its
Subsidiaries, leases and has valid leasehold interest in, all material
assets necessary for the conduct of the business of the Company and each
Designated Subsidiary as currently conducted. Each such asset is owned or
leased free of any Encumbrances (other than Permitted Encumbrances).
Neither the Company nor any Designated Subsidiary owns any real property or
interest in real property, except for the leaseholds created under the
lease agreements identified on Part 2.7 of the Company Disclosure Schedule
and the fixtures appurtenant thereto (the "LEASED PROPERTIES" and "LEASE
AGREEMENTS", respectively).
(B) All material items of equipment and other tangible assets owned by
or leased to the Company and its Subsidiaries are, taken as a whole,
adequate for the uses to which they are being put, are in good condition
and repair (ordinary wear and tear excepted).
(C) No Lease Agreement has been assigned or is subject to any
sublease, and no Person (other than the Company or a Subsidiary of the
Company) is in possession of any portion of the Leased Properties other
than the Company or a Subsidiary of the Company to the extent subject to
the Lease Agreements. All improvements constructed by any the Company or a
Subsidiary of the Company within the Leased Properties were constructed in
compliance in all material respects with all building codes, zoning
ordinances and all other applicable Legal Requirements.
(D) As of the date of this Agreement, neither the Company nor any
Subsidiary of the Company has received written notice of any condemnation
or eminent domain proceeding pending or threatened against the Leased
Properties or any part thereof.
(E) There is no Legal Proceeding pending or, to the Knowledge of the
Company, threatened against the Company or any Subsidiary of the Company
concerning the Leased Properties which would reasonably be expected to have
a material adverse effect on the ability of the Company and its
Subsidiaries to operate their businesses as currently conducted. As of the
date of this Agreement, neither the Company nor any Subsidiary of the
Company has received any written notice from any Governmental Body that any
condition on or improvements located on any of the Leased Properties are in
violation of any applicable building codes, zoning or land use laws, or
other law, order, ordinance, rule or regulation affecting the property.
2.8 CONTRACTS.
(A) Part 2.8(a) of the Company Disclosure Schedule contains a list as
of the date of this Agreement of each of the following contracts to which
the Company or any of its Subsidiaries is a party:
(I) each contract that would be required to be filed as an
exhibit to a Registration Statement on Form S-1 under the Securities
Act or an Annual Report on Form 10-K under the Exchange Act (if such
registration statement or report was filed by the Company with the SEC
on the date of this Agreement);
(II) any contract (A) relating to the employment of, or the
performance of services by, any employee, consultant or independent
contractor providing for a base annual compensation for any such
Person greater than $100,000 other than employment agreements that may
be terminated at will without payment of severance or other similar
obligations (other than in accordance with the general severance
policy), (B) pursuant to which the Company or any of its Subsidiaries
is or may become obligated to make any severance, termination or
similar payment to any current or former employee or director, or (C)
pursuant to which the Company or any of its Subsidiaries is or may
become obligated to make any bonus or similar payment (whether in the
form of cash, stock or other securities, excluding payments
constituting base salary and sales commissions) in excess of $75,000
to any current or former employee or director, or (D) pursuant to
which the Company or any of its Subsidiaries is or may become
obligated to provide any form of compensation, increase benefits, or
accelerate the vesting of any benefits, by the occurrence of any of
the transactions contemplated by this Agreement (either alone or in
connection with additional or subsequent events), or to calculate the
value of any benefits on the basis of any of the transactions
contemplated by this Agreement;
(III) each contract that restricts the ability of the Company or
any of its Subsidiaries to compete in any geographic area or line of
business, or any contract that limits the ability of the Company to
acquire a product or asset from another Person;
(IV) each joint venture agreement or partnership agreement with a
third party, other than agreements in the ordinary course relating to
the design and manufacture of products for customers;
(V) each employment contract with any director or officer of the
Company or its Designated Subsidiaries, other than non-binding offer
letters;
(VI) each contract that provides for indemnification of any
officer, director, employee or agent;
(VII) each contract (other than Contracts evidencing Company
Options) (A) relating to the acquisition, issuance, voting,
registration, sale or transfer of any of the Company's securities, (B)
providing any Person with any preemptive right, right of
participation, right of maintenance or similar right with respect to
any of the Company's securities, or (C) providing the Company or any
Subsidiary of the Company with any right of first refusal with respect
to, or right to repurchase or redeem, any of the Company's securities;
(VIII) each loan or credit agreement, indenture, mortgage, note
or other contract evidencing indebtedness for money borrowed by the
Company or any of its Subsidiaries from a third party lender, and each
contract pursuant to which any such indebtedness for borrowed money is
guaranteed by the Company or any of its Subsidiaries;
(IX) each customer or supply contract (excluding purchase orders
given or received in the ordinary course of business) under which the
Company or any Subsidiary of the Company paid or received in excess of
$400,000 in fiscal year 2007 or is expected to pay or receive in
excess of $400,000 in fiscal year 2008;
(X) each material "single source" supply contract pursuant to
which goods or materials are supplied to the Company or any Subsidiary
of the Company from an exclusive source or where procuring a
replacement supplier would reasonably be expected to result in a
material increase in costs;
(XI) each distribution, agency or franchise contract;
(XII) each collective bargaining agreement;
(XIII) each lease involving real property pursuant to which the
Company or any of its Subsidiaries is required to pay a monthly rental
in excess of $10,000;
(XIV) each lease or rental contract involving personal property
(and not relating primarily to real property) pursuant to which the
Company or any of its Subsidiaries is required to make rental payments
in excess of $200,000 per year;
(XV) each consulting contract providing for compensation in
excess of $100,000 per year that is not terminable by the Company or
any of its Subsidiaries on notice of 90 days or less;
(XVI) each contract relating to the acquisition, sale or
disposition of any business unit or product line of the Company and
its Subsidiaries since December 31, 2005 or pursuant to which the
Company or any of its Subsidiaries has any remaining obligations;
(XVII) each contract (A) containing "standstill" or similar
provisions relating to transactions involving the acquisition,
disposition or other transfer of assets or securities of an Entity, or
(B) imposing any right of first negotiation, right of first refusal or
similar right on the Company or a Subsidiary of the Company;
(XVIII) each contract creating a manufacturing supply arrangement
pursuant to which the Company or any Subsidiary may require a third
party to manufacture completed semiconductor wafers or pursuant to
which the Company or any Subsidiary is required to purchase completed
semiconductor wafers from a third party;
(XIX) any contract relating to the creation of an Encumbrance
(other than Permitted Encumbrances) with respect to any asset of the
Company or any of its Subsidiaries;
(XX) each contract relating to the purchase or sale of any
product or other asset by or to, or the performance of any services by
or for, any Affiliate of the Company other than purchase or sales of
products on arms length terms in the ordinary course of business;
(XXI) each contract that grants to any third party exclusive
rights under any Company Owned IP; and
(XXII) any other contract, if a breach of or the termination of
such contract would reasonably be expected to have or result in a
Material Adverse Effect on the Company;
(each contract listed in Part 2.8(a) of the Company Disclosure Schedule being
referred to as a "MATERIAL CONTRACT").
The Company has made available to Parent or Parent's legal advisor accurate and
complete copies of all Material Contracts in effect as of the date of this
Agreement, including all amendments thereto. There are no existing material
breaches or defaults on the part of the Company or any of its Subsidiaries under
any Material Contract; and, to the Knowledge of the Company, as of the date of
this Agreement, there are no existing material breaches or defaults on the part
of any other Person under any Material Contract. Except for Material Contracts
which expire or are not renewed after the date of this Agreement in accordance
with their terms, each Material Contract is valid, has not been terminated prior
to the date of this Agreement, is enforceable against the Company or the
applicable Subsidiary of the Company that is a party to such Material Contract,
and, to the Knowledge of the Company, is enforceable against the other parties
thereto, subject to (i) laws of general application relating to bankruptcy,
insolvency and the relief of debtors, and (ii) rules of law governing specific
performance, injunctive relief and other equitable remedies. To the Knowledge of
the Company, no event has occurred, and no circumstance or condition exists,
that (with or without notice or lapse of time) will, or would reasonably be
expected to, (A) result in a material violation or material breach of any of the
provisions of any Material Contract, (B) give any party to a Material Contract
the right to accelerate the maturity or performance of any Material Contract, or
(C) give any party to a material contract the right to cancel, terminate or
materially modify any Material Contract. As of the date of this Agreement,
neither the Company nor any of its Subsidiaries has received any written notice
regarding any unresolved issue that would constitute a material violation or
material breach of, or default under, any Material Contract. As of the date of
this Agreement, neither the Company nor any of its Subsidiaries has knowingly
waived any of its material rights under any Material Contract except in the
ordinary course of business.
(B) Except as set forth in Part 2.8(b) of the Company Disclosure
Schedule:
(I) since December 31, 2005, neither the Company nor any
Subsidiary of the Company has received any determination of
noncompliance, entered into any consent order or undertaken any
internal investigation relating directly or indirectly to any contract
or bid with an United States Governmental Entity;
(II) since December 31, 2005, the Company and its Subsidiaries
have complied with (A) all applicable Legal Requirements incorporated
expressly by reference or by operation of applicable law with respect
to all Government Contracts and government bids, and (B) all material
terms and conditions with respect to all Government Contracts,
including all clauses, provisions and requirements incorporated
expressly, by reference, or by operation of applicable law;
(III) the Company and its Subsidiaries have not, in obtaining or
performing any Government Contract, violated, to the extent
applicable, (A) the Truth in Negotiations Act of 1962, as amended, (B)
the Service Contract Act of 1963, as amended, (C) the Contract
Disputes Act of 1978, as amended, (D) the Office of Federal
Procurement Policy Act, as amended, (E) the Federal Acquisition
Regulations (the "FAR") or any applicable agency supplement thereto,
(F) the Cost Accounting Standards, (G) the Defense Industrial Security
Manual (DOD5220.22-M), (H) the Defense Industrial Security Regulation
(DOD5220.22-R) or any related security regulations or (I) any other
applicable procurement law or regulation or other similar Legal
Requirement;
(IV) since December 31, 2005, all facts set forth in or
acknowledged by any of the Company or a Subsidiary of the Company in
any certification, representation, warranty or disclosure statement
submitted by the Company or a Subsidiary of the Company (as
applicable) with respect to any Government Contract or government bid
were current, accurate and complete in all material respects as of the
date indicated in such submission or as of such other date as required
by the Government Contract and government bid;
(V) neither the Company nor any of its Subsidiaries, and, to the
Knowledge of the Company, no current employee of the Company or its
Subsidiaries, has been (during the three years prior to the date of
this Agreement) debarred or formally suspended from doing business
with any Governmental Entity;
(VI) no negative determination of responsibility has been issued
against and provided to the Company or any Subsidiary of the Company
in connection with any Government Contract or government bid and, to
the Knowledge of the Company, no circumstances exist that would
warrant a negative determination of responsibility against the Company
or any Subsidiary of the Company in connection with any Government
Contract or government bid;
(VII) since December 31, 2005, no Government Contract performed
by the Company or any Subsidiary of the Company has been terminated
for convenience or default;
(VIII) no cost incurred by the Company or any Subsidiary of the
Company pertaining to a Government Contract has been questioned,
challenged, investigated, or disallowed;
(IX) there is not and, since December 31, 2005, has not been any
(A) administrative, civil, criminal or other investigation, audit,
Legal Proceeding, or indictment involving the Company or its
Subsidiaries arising under or relating to the award or performance of
any Government Contract, (B) outstanding material claim against the
Company or its Subsidiaries by, or dispute involving any of the
Company or its Subsidiaries with, any prime contractor, subcontractor,
vendor or other Person arising under or relating to the award or
performance of any Government Contract, or (C) final decision of any
United States Governmental Entity against the Company or its
Subsidiaries;
(X) no payment has been made by the Company or any Subsidiary of
the Company or by any Person acting on their behalf to any Person
(other than to any bona fide employee or agent (as defined in subpart
3.4 of the FAR)) which is or was contingent upon the award of any
government contract or which would otherwise be in violation of any
applicable procurement law or regulation or any other Legal
Requirement;
(XI) neither the Company nor its Subsidiaries has made any
disclosure since December 31, 2005 to any United States Governmental
Entity with respect to any Government Contract or government bid
pursuant to any voluntary disclosure agreement;
(XII) in each case in which any of the Company or a Subsidiary of
the Company has delivered or otherwise provided any technical data,
computer software or other Intellectual Property to any United States
Governmental Entity in connection with any Government Contract, the
Company or Subsidiary of the Company (as applicable) has provided such
technical data, computer software and other Intellectual Property
solely as a "commercial item" pursuant to the Company's or
Subsidiary's (as applicable) commercial terms and conditions; and
(XIII) there are no "most favored nation" or similar price
reduction clauses in Government Contracts performed by the Company any
Subsidiary of the Company.
2.9 COMPLIANCE WITH LEGAL REQUIREMENTS.
(A) As of the date of this Agreement, the Company and its Subsidiaries
are in compliance in all material respects with all Legal Requirements
applicable to their businesses. Except as set forth in Part 2.9(a) of the
Company Disclosure Schedule, since December 31, 2005, neither the Company
nor any Subsidiary has (a) received any written notice from any
Governmental Entity regarding any actual or possible violation of, or
failure to comply with any material provision of, any Legal Requirement or
(b) filed or otherwise provided any written notice to any Governmental
Entity regarding any actual or possible material violation of, or failure
to comply with any material provision of, any Legal Requirement. There is
no such notice outstanding or unresolved as of the date of this Agreement.
(B) The Company and each Subsidiary is in compliance in all material
respects with applicable provisions of United States export, re-export and
import control laws and regulations related to the export or transfer of
commodities, software and technology, including the Export Administration
Regulations (15 C.F.R. ss.ss. 730-774); the International Traffic in Arms
Regulations (22 C.F.R. ss.ss. 120-130); the economic sanctions regulations
administered by the Office of Foreign Assets Control (31 C.F.R. ss.ss.
500-598); and the Customs Regulations (19 C.F.R. ss.ss. 1-357).
(C) The representations and warranties contained in this Section 2.9
do not apply to Environmental Laws.
2.10 LEGAL PROCEEDINGS; ORDERS.
(A) As of the date of this Agreement:
(I) there is no pending Legal Proceeding, and, to the Knowledge
of the Company, no Person has since December 31, 2005 threatened in
writing to commence any Legal Proceeding that, in either case: (a)
involves the Company or any of its Subsidiaries or any of the assets
owned or used thereby and would reasonably be expected to result in
damages (after any insurance coverage therefor) to the Company in
excess of $500,000; or (b) challenges, or that would reasonably be
expected to have the effect of preventing, delaying, making illegal or
otherwise interfering with, the transactions contemplated by this
Agreement.
(II) there is no claim, dispute or Legal Proceeding pending (or,
to the Knowledge of the Company, being threatened) against the Company
or any of its Subsidiaries that is reasonably expected to have a
Material Adverse Effect on the Company;
(III) there is no material court order or judgment specific to
the Company or any of its Subsidiaries to which the Company or any of
the Designated Subsidiaries is subject;
(IV) to the Knowledge of the Company, (x) none of the Company's
stockholders is subject to any material court order or judgment that
relates to the business or assets of the Company or any Subsidiary,
and (y) no officer or key employee of the Company or any of its
Subsidiaries is subject to any Order that prohibits such officer or
employee from engaging in or continuing any conduct, activity or
practice relating to the business of the Company or any of its
Subsidiaries as currently conducted or currently proposed to be
conducted;
(V) no investigation by any Governmental Entity with respect to
the Company or any of its Subsidiaries is pending or, to the Knowledge
of the Company, is being threatened; and
(VI) to the Knowledge of the Company, no Governmental Entity is,
as of the date of this Agreement, challenging the right of the Company
or any of its Subsidiaries to design, manufacture, license, offer or
sell any of its products or services.
(B) The Company has made available to Parent or Parent's legal advisor
accurate and complete copies of all attorneys' letters provided to the
auditors of the Company in connection with the financial statements
contained in the Company SEC Documents, including the Unaudited Interim
Financials.
2.11 GOVERNMENTAL AUTHORIZATIONS. As of the date of this Agreement, the
Company and the Designated Subsidiaries hold all Governmental Authorizations
material to enable them to conduct their businesses in the manner in which such
businesses are currently being conducted. The Governmental Authorizations held
by the Company and the Designated Subsidiaries are, in all material respects,
valid and in full force and effect. To the Knowledge of the Company, the Company
and the Designated Subsidiaries are in substantial compliance with the terms and
requirements of any material Governmental Authorizations. Between December 31,
2005 and the date of this Agreement, neither the Company nor any Designated
Subsidiary has received any written notice from any Governmental Entity
regarding (a) any actual or possible violation of or failure to comply with any
term or requirement of any material Governmental Authorization, or (b) any
actual or possible revocation, withdrawal, suspension, cancellation, termination
or modification of any material Governmental Authorization. The representations
and warranties contained in this Section 2.11 do not apply to Governmental
Authorizations necessary under Environmental Laws.
2.12 TAX MATTERS.
(A) All Tax Returns required to be filed by or with respect to the
Company and its Subsidiaries with any Governmental Entities before the
Effective Time (giving effect to all applicable extensions) (the "COMPANY
RETURNS") (i) have been or will be filed on or before the applicable due
date (as such due date may have been or may be extended), and (ii) have
been, or will be when filed, prepared in compliance with applicable Legal
Requirements in all material respects. All Taxes of the Company and its
Subsidiaries have been or will be duly and timely paid at or before the
applicable due date, other than any Taxes being contested in good faith and
for which adequate reserves have been reflected on the Company's financial
statements (including any related notes) contained in the Company SEC
Documents and the Unaudited Interim Financials. All copies of Company
Returns provided to Parent or Parent's legal advisor are accurate and
complete.
(B) The Company and each Subsidiary of the Company has withheld all
Taxes required to have been withheld in connection with any amounts paid or
owing to any employee, independent contractor, creditor, stockholder, or
other third party, and to the extent due and payable has duly and timely
paid such amounts to the appropriate tax authority.
(C) The Unaudited Interim Financials fully accrue all actual and
contingent liabilities of the Company and its Subsidiaries for all material
Taxes with respect to all periods through March 31, 2008 in accordance with
GAAP. The Company has established, in the ordinary course of business and
consistent with its past practices, appropriate reserves for the payment of
all material Taxes due and payable by the Company and its Subsidiaries for
the period from March 31, 2008 through the Effective Time.
(D) As of the date of this Agreement, (i) to the Knowledge of the
Company, there are no examinations or audits of any Company Return
currently underway and no such examination or audit is pending or
threatened in writing, (ii) no extension or waiver of the limitation period
applicable to any Company Return or for the assessment or collection of
Taxes is in effect and no such extension or waiver has been requested or is
pending, (iii) no claim or Legal Proceeding is pending (or, to the
Knowledge of the Company, is being threatened in writing) by any tax
authority against the Company or any of its Subsidiaries in respect of any
Tax, (iv) there are no unsatisfied liabilities for Taxes with respect to
any notice of deficiency or similar document received by the Company or any
of its Subsidiaries with respect to any Tax (other than liabilities for
Taxes asserted under any such notice of deficiency or similar document
which are being contested in good faith and with respect to which adequate
reserves for payment have been established on the Unaudited Interim
Financials), and (v) there are no liens for Taxes (other than Permitted
Encumbrances) upon any of the assets of the Company or any of its
Subsidiaries. Neither the Company nor any Subsidiary of the Company is or
will be required to include any adjustment in taxable income for any tax
period (or portion thereof) pursuant to Section 481 or 263A of the Code (or
any comparable provision of any tax law, rule or regulation) as a result of
transactions or events occurring, or accounting methods employed, prior to
the Effective Time. The Company has not been a member of any combined,
consolidated or unitary group for which it is or will be liable for taxes
under the principles of Section 1.1502-6 of the Treasury Regulations (or
any similar provision of state, local or foreign Tax law). Neither the
Company nor any of its Subsidiaries has made any distribution of stock of
any controlled corporation, as that term is defined in Section 355(a)(1) of
the Code or had its stock distributed by another Person, in a transaction
that was purported or intended to be governed in whole or in part by
Section 355 of the Code. Each of the Company and its Subsidiaries has
overtly disclosed in its Company Returns any tax reporting position taken
in any Company Return which could result in the imposition of penalties
under Section 6662 of the Code or any comparable Legal Requirement.
(E) Neither the Company nor any of its Subsidiaries is a party to any
tax indemnity agreement, tax sharing agreement, tax allocation agreement or
similar contract or arrangement with respect to the sharing and/or
allocation of Taxes.
(F) Neither the Company nor any Subsidiary of the Company has
consummated or participated in, or is currently participating in, any
transaction that was or is a "listed transaction" or to the Knowledge of
the Company, a "reportable transaction" within the meaning of Treasury
Regulations Section 1.6011-4(b) or similar transaction under any
corresponding or similar Legal Requirement.
(G) The Company has made available to Parent or Parent's advisors all
material documentation, including any tax rulings, relating to any
temporary exemption from tax, tax rate reduction, tax credit, tax incentive
or other special concession for the computation of tax made available by
any Governmental Entity to the Company or any Subsidiary of the Company.
(H) Except as set forth in Part 2.12(h) of the Company Disclosure
Schedule, neither the Company nor any Subsidiary of the Company is a party
to any contract or has adopted any plan that, in connection with the
transactions contemplated by this Agreement, would reasonably be expected
to result, separately or in the aggregate, in the payment of (i) any
"excess parachute payment" within the meaning of Section 280G of the Code
(or any corresponding provisions of state, local or foreign tax law) and
(ii) any amount that will not be fully deductible as a result of section
162(m) of the Code (or any corresponding provisions of state, local or
foreign tax law).
(I) Neither the Company nor any Subsidiary of the Company will be
required to include any item of income in, or exclude any item of deduction
from, taxable income for any taxable period (or portion there) ending after
the Effective Time as a result of any: (A) "closing agreement" as described
in Section 7121 of the Code (or any corresponding or similar provision of
state, local or foreign income tax law) executed prior to the Effective
Time; or (B) installment sale or open transaction disposition made prior to
the Effective Time.
2.13 EMPLOYEE BENEFIT PLANS.
(A) The Company has made available to Parent or Parent's legal advisor
copies of all employee benefit plans and programs maintained or contributed
to by the Company or any of its Subsidiaries or with respect to which the
Company or any of its Subsidiaries has or may in the future have any
liability (including, without limitation, copies of all plans and forms of
agreements under which stock, restricted stock, stock options, restricted
stock units, stock appreciation rights, performance stock awards or any
other stock award have been granted by the Company or any of its
Subsidiaries) (the "COMPANY PLANS"). Part 2.13(a) of the Company Disclosure
Schedule contains a complete and accurate list as of the date of this
Agreement of the Company Plans. The Company Plans were duly adopted.
Neither the Company, nor any Subsidiaries of the Company, has agreed or
committed to (i) to establish or enter into any new employee benefit plans
and programs, or (ii) modify any Company Plan (except as required to
conform with applicable Legal Requirements as previously disclosed to
Parent or as contemplated by this Agreement).
(B) Each Company Plan that is intended by the Company to be qualified
under Section 401(a) of the Code has received a favorable determination
letter (or opinion letter, if applicable) from the U.S. Internal Revenue
Service stating that such Company Plan is so qualified. Each Company Plan
has been operated in substantial compliance with its terms and with all
applicable Legal Requirements.
(C) Each of the Company and its Subsidiaries has performed, in all
material respects, all obligations required to be performed by it under the
Company Plans, and, to the Knowledge of the Company as of the date of this
Agreement, there has been no material default or violation by any other
party of the terms of any Company Plan. Each Company Plan has been
established and maintained in all material respects in accordance with its
terms and in material compliance with all applicable Legal Requirements,
including ERISA, the Code, and all applicable collective bargaining
agreements. Except as would not reasonably be expected to result in
material liability to the Company and its Subsidiaries, no "prohibited
transaction," within the meaning of Section 4975 of the Code or Sections
406 and 407 of ERISA, that is not otherwise exempt under Section 408 of
ERISA or Section 4975 of the Code, has occurred with respect to any Company
Plan. Except as would not reasonably be expected to result in material
liability to the Company and its Subsidiaries, there are no claims or Legal
Proceedings pending, or, to the Knowledge of the Company, threatened or
reasonably anticipated (other than routine claims for benefits), against
any Company Plan or against the assets of any Company Plan. Each Company
Plan (other than any Company Plan to be terminated prior to the Effective
Time in accordance with this Agreement) may be amended, terminated or
otherwise discontinued after the Effective Time in accordance with its
terms, without material liability to Parent, the Company, or any Subsidiary
of the Company (other than ordinary administration expenses and accrued
benefits), subject to applicable Legal Requirements. There are no audits,
inquiries or Legal Proceedings pending or, to the Knowledge of the Company,
threatened by the IRS, the DOL, or any other Governmental Entity with
respect to any Company Plan. Neither the Company nor any Subsidiary of the
Company, has in the last three years incurred any material penalty or tax
with respect to any Company Plan under Section 502(i) of ERISA, under
Sections 4975 through 4980 of the Code or under any other applicable Legal
Requirement. Each of the Company and its Subsidiaries has timely made all
contributions and other payments required by and due under the terms of
each Company Plan and all applicable collective bargaining agreements,
except for such failures as would not reasonably be expected to result in
material liability to the Company and its Subsidiaries.
(D) Except as set forth on Part 2.13(d) of the Company Disclosure
Schedule, since December 31, 2007, there has not been any material change
in any actuarial or other assumption used to calculate funding obligations
with respect to any Company Plan, or any material change in the manner in
which contributions to any Company Plan are made or the basis on which
contributions are to be determined.
2.14 LABOR MATTERS.
(A) The Company has made available to Parent or Parent's legal advisor
a report which accurately sets forth in all material respects, as of April
24, 2008, with respect to each employee of the Company and its Subsidiaries
as of such date (including any such employee who is on a leave of absence):
(I) the employee number of such employee;
(II) such employee's title; and
(III) such employee's annualized base salary.
(B) Part 2.14(b) of the Company Disclosure Schedule accurately
identifies each former employee of any of the Company or its Subsidiaries
who, as of May 15, 2008, is receiving or is currently scheduled to receive
any severance benefits (whether from the Company or any Subsidiary of the
Company or otherwise) relating to such former employee's employment with
any of the Company or a Subsidiary of the Company.
(C) Except as set forth in Part 2.14(c) of the Company Disclosure
Schedule, the employment of each of the employees of the Company and its
Subsidiaries is terminable by the Company or the applicable Subsidiary of
the Company at will, without payment of severance or other termination
benefits required by any contract to which the Company is a party.
(D) As of the date of this Agreement, to the actual knowledge of the
Chief Executive Officer and Vice President, Human Resources of the Company,
no director, officer or senior employee of any of the Company or a
Subsidiary of the Company: (i) has disclosed to an intention to terminate
his or her employment; or (ii) is a party to or is bound by any
confidentiality agreement, noncompetition agreement or other contract (with
any Person) that would reasonably be expected to have a material adverse
effect on: (A) the performance by such employee of any of his duties or
responsibilities as an employee of the Company or Subsidiary of the
Company; or (B) the business or operations of the Company or Subsidiary of
the Company.
(E) Except as would not reasonably be expected to result in material
liability to the Company: (i) no current or former independent contractors
of any of the Company or its Subsidiaries is a misclassified employee of
the Company or Subsidiary, as applicable; (ii) no independent contractor
(A) has provided services to any of the Company or its Subsidiaries for a
period of six consecutive months or longer or (B) is eligible to
participate in any Company Plan; and (iii) except as otherwise permitted by
applicable Legal Requirements, neither the Company nor any of its
Subsidiaries has ever had any temporary or leased employees who were not
treated and accounted for in all respects as employees of the Company or a
Subsidiary of the Company (including coverage under each applicable Company
Plan).
(F) There are no collective bargaining agreements or other labor union
or works council agreements to which the Company or any of its Subsidiaries
is a party (each a "LABOR AGREEMENT"), nor is any such Labor Agreement
currently being negotiated, nor is there any current duty on the part of
the Company or any Subsidiary of the Company to bargain with any labor
organization or works council or similar representative, nor are any labor
organizations, works councils or similar organizations representing or, to
the Knowledge of the Company, purporting to represent or seeking to
represent any employees of the Company or any of its Subsidiaries. The
Company has made available to Parent or Parent's legal advisor copies of
(i) each Labor Agreement and all amendments, addenda or supplements
thereto, (ii) all material correspondence and all charges, complaints,
notices or orders received by the Company or any Subsidiary from the
National Labor Relations Board or any labor organization during the period
from the date four (4) years prior to the date of this Agreement, and (iii)
all arbitration opinions interpreting and enforcing any Labor Agreement to
which the Company or any Subsidiary is a party, or by which the Company or
any of its Subsidiaries is bound. Neither the Company nor any of its
Subsidiaries during the past two (2) years had a National Labor Relations
Board unfair labor practice charge, or representation petition, filed
against it. Neither the Company nor any of its Subsidiaries has had any
strike, slowdown, work stoppage, boycott, picketing, lockout, job action,
union labor dispute in the past two (2) years (other than routine contract
negotiations). Except as would not reasonably be expected to result in
material liability to the Company, to the Knowledge of the Company, as of
May 15, 2008, there is no Legal Proceeding, claim (other than routine
claims for benefits), labor dispute, collective bargaining, or grievance
pending, or to the Knowledge of the Company, threatened or reasonably
anticipated, either by or against the Company or any Subsidiary of the
Company, relating to any employment contract, collective bargaining
obligation or agreement, wages and hours, leave of absence, plant closing
notification, employment statute or regulation, privacy right, labor
dispute, workers' compensation policy, retaliation, immigration or
discrimination matter involving the Company or any Subsidiary of the
Company.
(G) Each of the Company and its Subsidiaries: (i) is, and at all times
since December 31, 2005 has been, in material compliance with all
applicable Legal Requirements and with any order, ruling, decree, judgment
or arbitration award of any arbitrator or any court or other Governmental
Entity respecting employment, employment practices, terms and conditions of
employment, wages, employee benefits, hours or other labor-related matters,
including Legal Requirements relating to discrimination, wages and hours,
labor relations, leave of absence requirements, occupational health and
safety, privacy, harassment, retaliation, immigration, wrongful discharge
or violation of the personal rights of employees; (ii) has withheld and
reported in all material respects all amounts required by any Legal
Requirement or contract to be withheld and reported with respect to wages,
salaries and other payments to any employee; (iii) has no material
liability for any arrears of wages or any taxes or any penalty for failure
to comply with any of the foregoing; and (iv) has no material liability for
any payment to any trust or other fund governed by or maintained by or on
behalf of any Governmental Entity with respect to unemployment compensation
benefits, social security or other benefits or obligations for any employee
(other than routine payments to be made in the normal course of business
and consistent with past practice). Since December 31, 2005, neither the
Company nor any Subsidiary of the Company has effectuated a "mass layoff,"
"plant closing," partial "plant closing," "relocation" or "termination"
(each as defined in the Worker Adjustment and Retraining Notification Act
(the "WARN ACT") or any similar Legal Requirement) affecting any site of
employment or one or more facilities or operating units within any site of
employment or facility of the Company or any Subsidiary of the Company.
(H) Except as expressly required or provided by this Agreement,
neither the execution or delivery of this Agreement nor the consummation of
any of the transactions contemplated by this Agreement will (either alone
or upon the occurrence of any additional or subsequent events) constitute
an event under any Company Plan, trust or loan that will or may result
(either alone or in connection with any other circumstance or event) in any
payment (whether of severance pay or otherwise), acceleration of any right,
obligation or benefit, forgiveness of indebtedness, vesting, distribution,
increase in benefits or obligation to fund benefits with respect to any
employee of the Company or a Subsidiary of the Company.
(I) Neither the Company nor any Subsidiary or any current or former
ERISA Affiliate of the Company or any Subsidiary, has ever maintained,
established, sponsored, participated in, or contributed to any: (i) pension
plan subject to Title IV of ERISA; (ii) "multiemployer plan" within the
meaning of Section (3)(37) of ERISA; (iii) a plan described in Section 413
of the Code; (iv) a plan subject to the minimum funding standards or
Section 412 of the Code or Section 302 of ERISA; or (v) pension plan in
which stock of the Company or a Subsidiary or Affiliate of the Company is
or was held as a plan asset. The fair market value of the assets of each
funded foreign plan, the liability of each insurer for any foreign plan
funded through insurance, or the book reserve established for any foreign
plan, together with any accrued contributions, is sufficient to procure or
provide in full for the accrued benefit obligations with respect to all
current and former participants in such foreign plan according to the
actuarial assumptions and valuations most recently used to determine
employer contributions to and obligations under such foreign plan, and the
transactions contemplated by this Agreement shall not cause any such assets
or insurance obligations to be less than such benefit obligations, except
as would not reasonably be expected to result in material liability to the
Company and its Subsidiaries. "ERISA AFFILIATE" means any Entity that,
together with the Company or any of its Subsidiaries would be deemed a
"single employer" within the meaning of Section 414(b), (c) (m) or (o) of
the Code.
(J) Neither the Company nor any Subsidiary or Affiliate of the
Company, has incurred any material penalties, excise taxes or interest
under Title IV of ERISA and no condition exists that presents a risk now or
in the future to the Company or any Subsidiary or Affiliate of the Company
of incurring any such liability (other than liability for benefits or
premiums arising in the ordinary course), in each of the foregoing cases as
would reasonably be expected to result in, or has resulted in, any material
liability to the Company and its Subsidiaries. No pension plan of the
Company or any Subsidiary of the Company has an "accumulated funding
deficiency" (within the meaning of Section 301 of ERISA or Section 412 of
the Code) whether or not waived. Except as set forth in Part 2.14(k) of the
Company Disclosure Schedule, with respect to each pension plan of the
Company or any Subsidiary of the Company that is a defined benefit plan (as
defined in Section 3(35) of ERISA), the assets of such plan equal or exceed
the "benefit liabilities" (as defined in Section 4001(a)(16) of ERISA) and
valued on the basis of the continuation, and not the termination, of such
pension plan. In the past three years, no "reportable event" within the
meaning of Section 4043(c)(1), (4), (5), (6) or (13) of ERISA has occurred
with respect to any pension plan of the Company or any Subsidiary of the
Company that is a defined benefit plan (as defined in Section 3(35) of
ERISA). With respect to any pension plan of the Company or any Subsidiary
of the Company that is a "multiemployer plan" within the meaning of Section
3(37) of ERISA, the total potential withdrawal liability, within the
meaning of Section 4201 of ERISA, if the Company or any Subsidiary or
Affiliate of the Company were to withdraw from one or more of such pension
plans would not be expected to have an adverse effect on, or result in a
material liability to, the Company or any Subsidiary of the Company.
(K) No Company Plan provides (except at no cost to the Company or any
Subsidiary of the Company), retiree life insurance, retiree health benefits
or other retiree employee welfare benefits to any Person for any reason,
except as may be required by COBRA or other applicable Legal Requirements.
Other than commitments made that involve no future costs to any of the
Company or any Subsidiary of the Company, neither the Company nor any
Subsidiary of the Company, has to the Knowledge of the Company, ever
promised or contracted (whether in oral or written form) to any employee
(either individually or as a group) that any such employee or other Person
would be provided with retiree life insurance, retiree health benefits or
other retiree employee welfare benefits, except to the extent required by
applicable Legal Requirements.
(L) Each Company Plan and each employment agreement, or other
contract, plan, program, agreement, or arrangement to which the Company or
any Subsidiary of the Company is a party that is a "nonqualified deferred
compensation plan" (within the meaning of Section 409A(d)(1) of the Code)
has been operated in good faith compliance with Section 409A of the Code
and all applicable guidance relating thereto; and no additional tax under
Section 409A(a)(1)(B) of the Code has been or is reasonably expected to be
incurred by a participant in any such Company Plan, employment agreement,
or other contract, plan, program, agreement, or arrangement.
(M) Part 2.14(m) of the Company Disclosure Schedule accurately
identifies as of the date hereof the number of employees of the Company or
any Subsidiary of the Company who are not fully available to perform work
because of long-term disability or other long-term leave.
2.15 ENVIRONMENTAL MATTERS.
(A) The Company and its Subsidiaries are in compliance with all
applicable Environmental Laws in all material respects, which compliance
includes the possession by each of the Company and its Subsidiaries of all
Governmental Authorizations necessary under applicable Environmental Laws,
and each of the Company and its Subsidiaries is in material compliance with
the terms thereof. Between December 31, 2005 and the date of this
Agreement, neither the Company nor any of its Subsidiaries has received any
written notice from a Governmental Entity that alleges that the Company or
any of its Subsidiaries is materially violating any Environmental Law. To
the Knowledge of the Company, no current or prior owner of any property
leased or controlled by the Company or any of its Subsidiaries has received
any written notice from a Governmental Entity between December 31, 2005 and
the date of this Agreement that alleges that such current or prior owner or
the Company or any of its Subsidiaries is violating any Environmental Law.
Between December 31, 2005 and the date of this Agreement, the Company and
its Designated Subsidiaries have not released any Hazardous Materials at or
from the Company's facilities, except in compliance with Environmental Laws
and, to the Company's Knowledge, no hazardous materials have been released
at any other locations where any Hazardous Materials were generated,
manufactured, refined, transferred, stored, produced, imported, used,
processed from or disposed of by the Company or any Designated Subsidiary
and, in each case, for which the Company or any Designed Subsidiary has or
could reasonably be expected to have any material liability under an
Environmental Law. (For purposes of this Section 2.15, "ENVIRONMENTAL LAW"
shall mean any Legal Requirement relating to protection of human health and
safety, natural resources or the environment, including related to
pollution, contamination, cleanup, preservation, protection, and
reclamation of the environment, including any law regulating emissions,
discharges or releases of chemicals, pollutants, contaminants, wastes and
toxic substances, and "HAZARDOUS MATERIALS" shall mean all materials,
wastes, or substances defined by, or regulated under, any Environmental Law
as a hazardous waste, hazardous material, hazardous substance, extremely
hazardous waste, restricted hazardous waste, contaminant, pollutant, toxic
waste, or toxic substance, including petroleum and petroleum products,
asbestos, radon, lead, toxic mold, radioactive materials, and
polychlorinated biphenyls.)
(B) All Hazardous Materials stored, used, transported, disposed of and
handled by the Company and its Subsidiaries have been stored, used,
transported, disposed of and handled in material compliance with all
Environmental Laws.
(C) The Company has made available to Parent or Parent's legal advisor
results of all material environmental, health or safety assessments,
investigations, studies, tests or other analyses performed since January 1,
2006, and all Phase I site assessments (and all updates thereto) performed
since January 1, 2001 in the Company's possession or control with respect
to the facilities.
2.16 INSURANCE.
(A) Part 2.16(a) of the Company Disclosure Schedule identifies, as of
the date of this Agreement, each insurance policy maintained by, at the
expense of or for the benefit of the Company and the Designated
Subsidiaries and the Company has made available to Parent or Parent's legal
advisor accurate and complete copies of the insurance policies identified
in Part 2.16(a) of the Company Disclosure Schedule. Each of the insurance
policies identified in Part 2.16(a) of the Company Disclosure Schedule is
in full force and effect or has been replaced with a policy that provides
equivalent coverage in all material respects.
(B) Between December 31, 2005 and the date of this Agreement, neither
the Company nor any Designated Subsidiary has received any written
communication notifying the Company or any Designated Subsidiary of any (a)
cancellation or invalidation of any material insurance policy identified or
required to be identified in Part 2.16(a) of the Company Disclosure
Schedule (except with respect to policies that have been replaced with
similar policies), (b) refusal of any coverage or rejection of any material
claim under any such insurance policy (other than standard reservation of
rights letters), or (c) material increase in the amount of the premiums
payable with respect to any such insurance policy. As of the date of this
Agreement, except as set forth in Part 2.16(b) of the Company Disclosure
Schedule, there is no pending claim by the Company or any Designated
Subsidiary under any insurance policy identified or required to be
identified in Part 2.16(a) of the Company Disclosure Schedule.
2.17 CERTAIN BUSINESS PRACTICES. Except as set forth in Part 2.17 of the
Company Disclosure Schedule, neither the Company nor any of its Subsidiaries
has: (a) used any funds for unlawful contributions, gifts or entertainment, or
for other unlawful expenses, related to political activity; (b) made any
unlawful payment to foreign or domestic government officials or employees or to
foreign or domestic political parties or campaigns; or (c) violated any
provision of the Foreign Corrupt Practices Act of 1977, as amended.
2.18 PRODUCT WARRANTIES. As of the date of this Agreement, except as set
forth in Part 2.18 of the Company Disclosure Schedule, to the Knowledge of the
Company, there are no material claims pending or being threatened against the
Company or any of its Subsidiaries with respect to any warranties provided by
the Company or any of its Subsidiaries with respect to their respective
products.
2.19 TRANSACTIONS WITH AFFILIATES. To the Knowledge of the Company, between
the date of the Company's last proxy statement filed with the SEC and the date
of this Agreement, no event has occurred that would be required to be reported
by the Company pursuant to Item 404 of Regulation S-K promulgated by the SEC.
2.20 AUTHORITY; BINDING NATURE OF AGREEMENT; BOARD APPROVAL.
(A) The Company has the requisite corporate power and authority to
execute and deliver this Agreement and to perform its obligations under
this Agreement and, subject to the adoption of this Agreement by holders of
a majority of the outstanding shares of Company Common Stock in accordance
with the DGCL and the Company's Organizational Documents, to consummate the
transactions contemplated by this Agreement. The execution and delivery of
this Agreement by the Company and the consummation by the Company of the
Merger and the other transactions contemplated by this Agreement have been
duly and validly authorized by all necessary corporate action on the part
of the Company, and no other corporate proceedings on the part of the
Company are necessary to authorize this Agreement or to consummate the
transactions contemplated by this Agreement other than, with respect to the
Merger, the adoption of this Agreement by the holders of a majority of the
then outstanding shares of Company Common Stock in accordance with the DGCL
and the Company's Organizational Documents and the filing of the
appropriate merger documents as required by the DGCL. This Agreement has
been duly and validly executed and delivered by the Company and, assuming
the due authorization, execution and delivery of this Agreement by Parent
and Merger Sub, constitutes the legal and binding obligation of the
Company, enforceable against the Company in accordance with its terms,
subject to (i) laws of general application relating to bankruptcy,
insolvency and the relief of debtors, and (ii) rules of law governing
specific performance, injunctive relief and other equitable remedies.
(B) The board of directors of the Company has (i) determined that the
Merger is advisable and fair to, and in the best interests of, the Company
and its stockholders, (ii) approved this Agreement, the Merger and the
other transactions contemplated by this Agreement, and (iii) determined,
subject to the terms of this Agreement, to make the Company Board
Recommendation, all by a vote of the members of such board of directors
present at a meeting to consider and vote upon such matters.
2.21 VOTE REQUIRED. The affirmative vote of the holders of a majority of
the shares of Company Common Stock entitled to vote with respect to the Merger
and outstanding on the record date for the Company Stockholders Meeting is the
only vote of the holders of any class or series of the Company's capital stock
necessary to adopt this Agreement.
2.22 NON-CONTRAVENTION; CONSENTS. Except as set forth in Part 2.22 of the
Company Disclosure Schedule, the execution and delivery of this Agreement by the
Company and the consummation by the Company of the Merger and the other
transactions contemplated by this Agreement will not directly or indirectly
(with or without notice or lapse of time):
(A) contravene, conflict with or result in a violation of (i) any of
the provisions of the Organizational Documents of the Company or any of its
Subsidiaries, or (ii) any resolution adopted by the stockholders or the
board of directors, or any committee thereof, of the Company;
(B) contravene, conflict with or result in a violation in any material
respect or breach of, or result in a default in any material respect under,
any provision of any Material Contract, including the Indenture, or give
any Person the right to (i) declare a default or exercise any remedy under
any Material Contract, or (ii) accelerate the maturity or performance in
any material respect of any obligation under any Material Contract (it
being clarified that, assuming Parent executes a supplemental indenture in
accordance with Section 10.12 of the Indenture and Parent Ordinary Shares
continue to be approved for listing on The Nasdaq Global Market, the
transactions contemplated by this Agreement will not constitute a
Fundamental Change (as such term is defined in the Indenture));
(C) contravene, conflict with or result in a violation of any of the
terms or requirements of, or give any Governmental Entity the right to
revoke, withdraw, suspend, cancel, terminate or modify, any material
Governmental Authorization that is held by the Company or any Designated
Subsidiary or that otherwise relates to the business of any of the Company
or any Designated Subsidiary or to any material assets owned or leased by
any of the Company or its Designated Subsidiaries;
(D) result in the imposition or creation of any Encumbrance upon or
with respect to any asset owned or used by the Company or any Designated
Subsidiary (except for Permitted Encumbrances); or
(E) result in the transfer of any material asset of the Company or any
Designated Subsidiary to any Person.
Except as may be required by the Exchange Act, the DGCL, antitrust or
competition laws of foreign jurisdictions or the Bylaws of the Financial
Industry Regulatory Authority, Inc., the Company is not required to make any
filing with or to obtain any consent from any Person at or prior to the
Effective Time in connection with the execution and delivery of this Agreement
by the Company or the consummation by the Company of the Merger, except where
the failure to make any such filing or obtain any such consent would not have a
Material Adverse Effect on the Company.
2.23 TAKEOVER STATUTES. As of the date hereof, no state takeover statute or
similar statute or regulation applies to or purports to apply to the Merger,
this Agreement or the transactions contemplated by this Agreement that would
require the Company to take any action prior to the execution and delivery of
this Agreement that has not been taken.
2.24 OPINION OF FINANCIAL ADVISOR. The Company's Board of Directors has
received the opinion of UBS Securities LLC to the effect that, as of the date of
such opinion specified therein and subject to the various qualifications and
assumptions set forth therein, the Exchange Ratio was fair, from a financial
point of view, to the holders of Company Common Stock, and the Company will
provide a copy of such opinion to Parent solely for informational purposes as
soon as reasonably practicable after receipt thereof by the Company.
2.25 BROKERS. No broker, finder or investment banker (other than UBS
Securities LLC) is entitled to any brokerage, finder's or other similar fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of the Company.
2.26 REGISTRATION STATEMENT/PROXY STATEMENT. The written information to be
supplied by the Company for inclusion in the Proxy Statement/Prospectus shall
not on the date the Proxy Statement/Prospectus is first mailed to the
stockholders of the Company, at the time of the Company Stockholders Meeting and
at the Effective Time, (i) contain any untrue statement of a material fact, (ii)
omit to state any material fact required to be stated therein or necessary in
order to make the statements contained therein, in light of the circumstances
under which they were made, not misleading, or (iii) omit to state any material
fact necessary to correct any statement in any earlier written communication
constituting a solicitation of proxies by the Company for the Company
Stockholders Meeting which has in the interim become false or misleading in any
material respect.
2.27 RECEIVABLES; CUSTOMERS; SUPPLIERS AND SERVICE PROVIDERS.
(A) All of existing accounts receivable of the Company and its
Subsidiaries reflected on the Unaudited Interim Financials that have not
yet been collected (i) represent valid obligations of customers arising
from bona fide transactions entered into in the ordinary course of business
and (ii) are current and, to the Knowledge of the Company, will be
collected in full, without any counterclaim or set off (net of an allowance
for doubtful accounts of $300,000).
(B) Part 2.27(c) of the Company Disclosure Schedule provides a list as
of the date of this Agreement of all outstanding loans and advances made by
the Company and any Subsidiary of the Company to any stockholder, employee,
director, consultant or independent contractor, other than advances made to
employees, directors, consultants or independent contractors for business
expenses in the ordinary course of business consistent with past practice.
(C) As of the date of this Agreement, neither the Company nor any
Subsidiary of the Company has received any written notice from any material
customer indicating that any such customer plans to cease dealing with the
Company or the applicable Subsidiary or may otherwise materially reduce the
volume of business transacted by such customer with the Company or the
applicable Subsidiary below historical levels.
(D) Except as set forth on Part 2.27(d) of the Company Disclosure
Schedule and except for outstanding accounts receivables from any customer
in an amount less than $100,000, as of May 13, 2008, each customer of the
Company or a Subsidiary of the Company has paid in full, on or before the
due date, all amounts owed by such customer to the Company or its
Subsidiary (as the case may be).
(E) Except as set forth on Part 2.27(e) of the Company Disclosure
Schedule and except for outstanding accounts payable from any supplier or
service provider in an amount less than $100,000, as of May 13, 2008, each
of the Company and its Subsidiaries has paid in full, on or before the due
date, all amounts owed to their respective suppliers and service providers.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub hereby jointly and severally represent and warrant to
the Company that, except as set forth in the disclosure schedule delivered to
the Company on the date of this Agreement (the "PARENT DISCLOSURE SCHEDULE"):
3.1 DUE ORGANIZATION AND GOOD STANDING.
(A) Parent and each of its Subsidiaries is a corporation duly
organized, validly existing and (where such concept is recognized under the
laws of the jurisdiction in which it is incorporated) in good standing
under the laws of the jurisdiction in which it is organized, and has all
requisite corporate power and authority necessary to: (i) carry on its
business as it is now being conducted; and (ii) perform its obligations
under all contracts to which it is a party or under which it has rights
and/or obligations. Parent and each of its Subsidiaries is duly qualified
to do business and is in good standing in each state or foreign
jurisdiction in which the nature of the business conducted by it makes such
qualification necessary, except where the failure to be so qualified would
not have a Material Adverse Effect on Parent. Neither Parent nor any
Subsidiary of Parent has agreed or is obligated to make or may become
obligated to make, any future investment in or capital contribution in any
other Entity.
(B) Part 3.1 of the Parent Disclosure Schedule lists all Subsidiaries
of Parent, together with the jurisdiction of organization of each such
Subsidiary.
3.2 ARTICLES OF ASSOCIATION; CERTIFICATE OF INCORPORATION; BYLAWS. Parent
has made available to the Company or the Company's legal advisor: (i) copies of
the Organizational Documents of Parent and each Subsidiary of Parent, including
all amendments thereto; and (ii) the stock or other equity records of Parent and
each Subsidiary of Parent.. The stock or other equity records of Parent are
accurate, up-to-date and complete in all material respects. Parent is not in
violation of its Organizational Documents.
3.3 CAPITALIZATION, ETC.
(A) The authorized share capital of Parent consists of 800,000,000
shares of Parent Ordinary Shares. As of 5:00 p.m. Pacific Time on May 15,
2008: (i) 125,364,021 Parent Ordinary Shares were issued and outstanding,
of which no shares were unvested or were subject to any repurchase rights,
risk of forfeiture or other similar condition in favor of Parent; (ii)
37,429,273 Parent Ordinary Shares were issuable upon the exercise of
warrants that were issued and outstanding; (iii) 32,702,228 Parent Ordinary
Shares were issuable upon the exercise of options that were issued and
outstanding; (iv) 57,683,366 Parent Ordinary Shares were issuable upon the
conversion of convertible debentures that were outstanding; and (v)
117,763,158 Parent Ordinary Shares were issuable upon the conversion of
capital notes that were outstanding . Between 5:00 p.m. Pacific Time on May
15, 2008 and the date of this Agreement, Parent has not issued any Parent
Ordinary Shares except shares issued upon exercise of outstanding options
or warrants or conversion of outstanding convertible debentures. As of the
date of this Agreement, in the aggregate, 787,000 Parent Ordinary Shares
were reserved for future issuance pursuant to Parent's equity incentive
plans.
(B) All the outstanding shares of capital stock of Parent and each
Subsidiary of Parent have been duly authorized and validly issued and are
fully paid and nonassessable.
(C) Except as set forth in Part 3.3(c)(i) of the Parent Disclosure
Schedule (i) none of the outstanding shares of capital stock of Parent is
entitled or subject to any preemptive right or right of participation; (ii)
none of the outstanding shares of the capital stock of Parent is subject to
any right of first refusal or similar right in favor of Parent; and (iii)
there is no agreement in place relating to the voting or registration of,
or restricting any Person from purchasing, selling, pledging or otherwise
disposing of (or granting any option or similar right with respect to), any
shares of the capital stock of Parent.
(D) Except for options, rights, securities and plans referred to in
Section 3.3(a), as of the date of this Agreement and except as set forth on
Part 3.3(d) of the Parent Disclosure Schedule, there is no: (i) outstanding
subscription, option, call, warrant or stock appreciation right or other
right (whether or not currently exercisable) to acquire any shares of the
capital stock or other securities of Parent or any Subsidiary of Parent;
(ii) outstanding restricted stock awards, restricted stock unit awards,
performance stock awards or performance cash awards; (iii) outstanding
security, instrument or obligation that is or may become convertible into
or exchangeable for any shares of the capital stock or other securities of
Parent or any Subsidiary of Parent; (iv) contract under which Parent or any
Subsidiary of Parent is or may become obligated to sell or otherwise issue
any shares of its capital stock or any other securities; or (v) to the
Knowledge of Parent, condition or circumstance that may give rise to or
provide a basis for the assertion of a claim by any Person to the effect
that such Person is entitled to acquire or receive any capital stock of
Parent or other securities of Parent.
(E) All outstanding shares of capital stock, options, warrants, stock
appreciation rights and other securities or equity interests of Parent have
been issued and granted in compliance in all material respects with all
applicable securities laws and other applicable Legal Requirements.
(F) All of the outstanding equity interests of each of Parent's
Subsidiaries: (i) have been duly authorized and validly issued, (ii) are
nonassessable and free of preemptive rights, with no obligation to
contribute additional capital, and (iii) except as set forth in Part 3.3(f)
of the Parent Disclosure Schedule, are owned beneficially and of record by
Parent, free and clear of any Encumbrances (other than Permitted
Encumbrances).
3.4 SEC FILINGS; FINANCIAL STATEMENTS; FINANCIAL CONTROLS.
(A) All registration statements (on a form other than Form S-8),
annual and current reports and other documents required to be filed by
Parent with the SEC between February 2, 2006 and the date of this Agreement
(the "PARENT SEC DOCUMENTS") have been so filed. As of the time it was
filed with the SEC (or, if amended or superseded by a filing prior to the
date of this Agreement, then on the date of such filing): (i) each of the
Parent SEC Documents complied in all material respects with the applicable
requirements of the Securities Act or the Exchange Act (as the case may
be); and (ii) none of the Parent SEC Documents contained any untrue
statement of a material fact or omitted to state a material fact required
to be stated therein or necessary in order to make the statements therein,
in the light of the circumstances under which they were made, not
misleading. Between March 13, 2006 and the date of this Agreement, Parent
has filed or furnished, as applicable, on a timely basis all forms,
statements, certifications, reports and documents required to be filed with
the Israeli Securities Authority (the "ISA") under the Israeli Securities
Law 1968 and any regulation promulgated thereunder (the "ISRAELI SECURITIES
LAW") (the forms, statements, reports and documents filed with or furnished
to the ISA, the "PARENT ISRAEL REPORTS" and, together with the Parent SEC
Documents, the "PARENT REPORTS"). Each of the Parent Israel Reports, at the
time of its filing, complied in all material respects with the applicable
requirements of the Israeli Securities Law. As of their respective dates
(or, if amended prior to the date hereof, as of the date of such amendment)
Parent Israel Reports did not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements made therein, in light of the
circumstances in which they were made, not misleading.
(B) (i) The financial statements (including any related notes)
contained in the Parent Reports; and (ii) the unaudited consolidated
balance sheet of Parent and its consolidated Subsidiaries as of March 31,
2008 and the related unaudited consolidated statement of operations,
statement of changes in shareholders' equity and statement of cash flows of
Parent and its consolidated Subsidiaries for the three months then ended,
together with the notes thereto (the "UNAUDITED PARENT INTERIM FINANCIALS")
were prepared in accordance with GAAP applied on a consistent basis
throughout the periods covered (except as may be indicated in the notes to
such financial statements or, in the case of unaudited statements, as
permitted by Form 6-K of the SEC) and fairly present, in all material
respects, the consolidated financial position of Parent and its
Subsidiaries as of the respective dates thereof and the consolidated
results of operations of Parent and its Subsidiaries for the periods
covered thereby (except that unaudited financial statements may not contain
footnotes and are subject to year-end adjustments, which are not reasonably
expected to be individually or in the aggregate, material in magnitude).
(C) Neither Parent nor any of its Subsidiaries has any liabilities of
the type required to be disclosed in the liabilities column of a balance
sheet prepared in accordance with GAAP, except for: (i) liabilities
disclosed in the financial statements (including any related notes)
contained in the Parent Reports and the Unaudited Interim Financials; (ii)
liabilities incurred since March 31, 2008 and in the ordinary course of
business; (iii) liabilities and obligations incurred in connection with
Parent's performance of its obligations under this Agreement and the
transactions contemplated hereby; (iv) liabilities described in Part 3.4(c)
of the Parent Disclosure Schedule; and (v) liabilities incurred on or
following the date of this Agreement to the extent such liabilities would
not reasonably be expected to result in a Material Adverse Effect on
Parent.
(D) Neither Parent nor any Subsidiary of Parent has ever effected or
maintained any "off-balance sheet arrangement" (as defined in Item 303(c)
of Regulation S-K of the SEC).
(E) Parent and its Subsidiaries maintain adequate internal accounting
controls that are reasonably designed to ensure that: (i) transactions are
executed with management's general or specific authorization; (ii)
transactions are recorded as necessary to permit preparation of the
consolidated financial statements of Parent and its consolidated
Subsidiaries and to maintain accountability for the assets of Parent and
its Subsidiaries; (iii) access to the assets of Parent and its Subsidiaries
is permitted only in accordance with management's general or specific
authorization; and (iv) the recorded accountability for assets is compared
with the existing assets at reasonable intervals and appropriate action is
taken with respect to any differences.
(F) Parent's "disclosure controls and procedures" (as such terms are
defined in paragraph (e) of Rule 13a-15 under the Exchange Act) are
reasonably designed to ensure that material information required to be
disclosed by the Company in its reports that it files or furnishes under
the Exchange Act is recorded, processed, summarized and reported within the
time period specified in the rules and forms of the Commission, and that
all such material information is accumulated and communicated to the
Company's management as appropriate to allow timely decisions regarding
required disclosure and to make the certifications of the principal
executive officer and principal financial officer of Parent required under
the Exchange Act with respect to such reports.
(G) Parent's management has completed assessment of the effectiveness
of Parent's internal control over financial reporting in compliance with
the requirements of Section 404 of the Sarbanes-Oxley Act for the year
ended December 31, 2007, and such assessment concluded that such controls
were effective. Parent has made available to the Company or the Company's
legal advisor any material communication made by management or Parent's
auditors prior to the date of this Agreement to the audit committee
required or contemplated by listing standards of the Nasdaq Global Market,
the audit committee's charter or professional standards of the Public
Company Accounting Oversight Board. As of the date of this Agreement, no
material complaints from any source regarding accounting, internal
accounting controls or auditing matters, and no material concerns from
Parent or subsidiary of the Parent employees regarding questionable
accounting or auditing matters, have been received by Parent.
(H) As of the date of this Agreement, Parent is in compliance in all
material respects with the applicable provisions of the Sarbanes-Oxley Act
and with applicable listing and other rules and regulations of the Nasdaq
Global Market and has not received any notice from the Nasdaq Global Market
asserting any material non-compliance with such rules and regulations. As
of the date of this Agreement, each of the principal executive officer of
Parent and the principal financial officer of Parent has made all
certifications required by Rule 13a-14 or 15d-14 under the Exchange Act and
Sections 302 and 906 of the Sarbanes-Oxley Act with respect to the Parent
SEC Documents, and the statements contained in such certifications are
accurate in all material respects. For purposes of this Agreement,
"principal executive officer" and "principal financial officer" shall have
the meanings given to such terms in the Sarbanes-Oxley Act. Neither Parent
nor any of its subsidiaries has outstanding, or has arranged any
outstanding, "extensions of credit" in the form a personal loan to
directors or executive officers within the meaning of Section 13(k) of the
Exchange Act. No attorney representing Parent or any of its Subsidiaries,
whether or not employed by Parent or any of its Subsidiaries, has reported
evidence of a violation of securities laws by Parent, any Subsidiary of
Parent or any of its officers, directors, employees or agents to Parent's
chief legal officer, audit committee (or other committee designated for the
purpose) of Parent's board of directors or Parent's board of directors.
3.5 ABSENCE OF CERTAIN CHANGES. Between December 31, 2007 and the date of
this Agreement, and except as set forth on Part 3.5 of the Parent Disclosure
Schedule, neither Parent nor any of its Subsidiaries has: (a) suffered any
adverse change with respect to its business, customers, suppliers or financial
condition which has had a Material Adverse Effect on Parent; (b) amended its
Organizational Documents, or effected or been a party to (other than as a
stockholder) any recapitalization, reclassification of shares, stock split,
reverse stock split or similar transaction; (c) changed, in any material
respect, its accounting methods, principles or practices except as required by
changes in GAAP; (d) declared, set aside or paid any dividend or made any other
distribution with respect to the outstanding Parent Ordinary Shares or
repurchased or redeemed any Parent Ordinary Shares or other securities of
Parent; (e) acquired any equity interest or voting interest in any Entity (other
than a Subsidiary disclosed in Part 3.1 of the Parent Disclosure Schedule); (f)
commenced or settled any Legal Proceeding (i) involving damages for greater than
$100,000, (ii) involving the payment of more than $100,000, or (iii) seeking
specific performance or injunctive relief; (g) received a written claim by a
third party in which the commencement of a Legal Proceeding involving damages
for greater than $100,000 is threatened; or (h) entered into any binding
agreement to take any of the actions referred to in clauses "(b)" through "(g)"
of this sentence.
3.6 IP RIGHTS.
(A) Parent and its Subsidiaries exclusively own all right, title and
interest to and in the Parent Owned IP free and clear of any Encumbrances
(other than Permitted Encumbrances). Without limiting the generality of the
foregoing, Parent and its Subsidiaries exclusively own all right, title and
interest to and in Parent Owned IP created or developed using any funding,
facilities or personnel of any Governmental Entity or any university or
other educational institution.
(B) To the Knowledge of Parent, Parent possesses (by ownership,
license or otherwise) all material Intellectual Property and Intellectual
Property necessary to conduct the business of Parent and its Subsidiaries
as currently conducted. The parties acknowledge and agree that the
foregoing statement does not constitute a representation or warranty as to,
and is not intended to apply to, any potential, actual or suspected
infringement, misappropriation or violation of any Intellectual Property
Right of any other Person by Parent or any of its Subsidiaries.
3.7 CONTRACTS.
(A) Part 3.7 of the Parent Disclosure Schedule contains a list as of
the date of this Agreement of each of the following contracts to which
Parent or any of its Subsidiaries is a party:
(I) each contract (A) relating to the acquisition, issuance,
voting, registration, sale or transfer of any of Parent's securities,
(B) providing any Person with any preemptive right, right of
participation, right of maintenance or similar right with respect to
any of Parent's securities, or (C) providing Parent or any Subsidiary
of Parent with any right of first refusal with respect to, or right to
repurchase or redeem, any of Parent's securities;
(II) each loan or credit agreement, indenture, mortgage, note or
other contract evidencing indebtedness for money borrowed by Parent or
any of its Subsidiaries from a third party lender, and each contract
pursuant to which any such indebtedness for borrowed money is
guaranteed by Parent or any of its Subsidiaries, in each case
involving indebtedness in excess of $1 million;
(III) any contract relating to the creation of a security
interest, mortgage, pledge, hypothecation or other similar encumbrance
with respect to any asset of Parent or any of its Subsidiaries, where
such contract relates to indebtedness in excess of $1 million;
(each contract listed in Part 3.7 of the Parent Disclosure Schedule being
referred to as a "PARENT MATERIAL CONTRACT").
(B) Parent has made available to the Company or the Company's legal
advisor accurate and complete copies of all Parent Material Contracts (as
defined below) in effect as of the date of this Agreement, including all
amendments thereto. There are no existing material breaches or defaults on
the part of Parent or any of its Subsidiaries under any Parent Material
Contract; and, to the Knowledge of Parent, there are no existing material
breaches or defaults on the part of any other Person under any Parent
Material Contract. Each Parent Material Contract is valid, has not been
terminated prior to the date of this Agreement, is enforceable against
Parent or the applicable Subsidiary of Parent that is a party to such
Parent Material Contract, and, to the Knowledge of Parent, is enforceable
against the other parties thereto, subject to (i) laws of general
application relating to bankruptcy, insolvency and the relief of debtors,
and (ii) rules of law governing specific performance, injunctive relief and
other equitable remedies. To the Knowledge of Parent, no event has
occurred, and no circumstance or condition exists, that (with or without
notice or lapse of time) will, or would reasonably be expected to, (A)
result in a material violation or material breach of any of the provisions
of any Parent Material Contract, (B) give any party to a Parent Material
Contract the right to accelerate the maturity or performance of any Parent
Material Contract, or (C) give any party to a material contract the right
to cancel, terminate or materially modify any Parent Material Contract. As
of the date of this Agreement, neither Parent nor any of its Subsidiaries
has received any written notice regarding any unresolved issue that would
constitute a material violation or material breach of, or default under,
any Parent Material Contract. As of the date of this Agreement, neither
Parent nor any of its Subsidiaries has knowingly waived any of its material
rights under any Parent Material Contract except in the ordinary course of
business.
(C) The Merger, and the issuance of the Parent Ordinary Shares in
connection therewith, will not trigger any anti-dilution provisions under
the terms of any debentures, options or warrants or require Parent to issue
additional Parent Ordinary Shares or other securities of Parent or reduce
the exercise or conversion price of any options or warrants exercisable
for, or notes or debentures convertible into, Parent Ordinary Shares or
other securities of Parent or otherwise give effect to any similar
adjustments to any of Parent's securities.
(D) Parent's failure to meet the conditions of the Investment Center
approval with respect to Fab 2 have not been deemed and, to its Knowledge,
will not be deemed as a cross-default under the terms of the Facility
Agreement.
(E) Based on the financial statements of the Company disclosed in the
Company SEC Reports, immediately following the Closing, on a pro forma
basis as if the Merger had occurred as of, and for the twelve months ended,
March 31, 2008, Parent will not be in breach of the covenants in Section
5.1 of the Conversion Agreements, dated September 28, 2006, with each of
Bank Hapoalim B.M. and Bank Leumi Le-Israel B.M.
3.8 COMPLIANCE WITH LEGAL REQUIREMENTS.
(A) As of the date of this Agreement, the Parent and its Subsidiaries
are in compliance in all material respects with all Legal Requirements
applicable to their businesses. Except as set forth in Part 3.8(a) of the
Parent Disclosure Schedule, since December 31, 2005, neither Parent nor any
of its Subsidiaries have (a) received any written notice from any
Governmental Entity regarding any actual or possible violation of, or
failure to comply with any material provision of, any Legal Requirement or
(b) filed or otherwise provided any written notice to any Governmental
Entity regarding any actual or possible material violation of, or failure
to comply with any material provision of, any Legal Requirement. There is
no such notice outstanding or unresolved as of the date of this Agreement.
(B) The Parent and each of its Subsidiaries is in compliance in all
material respects with applicable provisions of United States export,
re-export and import control laws and regulations related to the export or
transfer of commodities, software and technology, including the Export
Administration Regulations (15 C.F.R. ss.ss. 730-774); the International
Traffic in Arms Regulations (22 C.F.R. ss.ss. 120-130); the economic
sanctions regulations administered by the Office of Foreign Assets Control
(31 C.F.R. ss.ss. 500-598); and the Customs Regulations (19 C.F.R. ss.ss.
1-357).
3.9 LEGAL PROCEEDINGS; ORDERS. As of the date of this Agreement:
(A) there is no Legal Proceeding pending (or, to the Knowledge of
Parent, being overtly threatened) against Parent or Merger Sub that would
materially and adversely affect Parent's or Merger Sub's ability to
consummate any of the transactions contemplated by this Agreement;
(B) there is no claim, dispute or Legal Proceeding pending (or, to the
Knowledge of Parent, being threatened) against Parent or any of its
Subsidiaries that is reasonably expected to have a Material Adverse Effect
on Parent;
(C) there is no material court order or judgment to which Parent or
Merger Sub is subject that is reasonably expected to have a Material
Adverse Effect on Parent or that would materially and adversely affect
Parent's or Merger Sub's ability to consummate any of the transactions
contemplated by this Agreement; and
(D) no investigation by any Governmental Entity with respect to
Parent, Merger Sub or any other Affiliate of Parent is pending or is being
overtly threatened, other than any investigation that would not materially
and adversely affect Parent's or Merger Sub's ability to consummate any of
the transactions contemplated by this Agreement.
3.10 GOVERNMENTAL AUTHORIZATIONS. As of the date of this Agreement, Parent
and its Subsidiaries hold all Governmental Authorizations material to enable
them to conduct their businesses in the manner in which such businesses are
currently being conducted. The Governmental Authorizations held by Parent and
its Subsidiaries are, in all material respects, valid and in full force and
effect. To the Knowledge of Parent, Parent and its Subsidiaries are in
substantial compliance with the terms and requirements of any material
Governmental Authorizations. Between December 31, 2005 and the date of this
Agreement, neither Parent nor any of its Subsidiaries has received any written
notice from any Governmental Entity regarding (a) any actual or possible
violation of or failure to comply with any term or requirement of any material
Governmental Authorization, or (b) any actual or possible revocation,
withdrawal, suspension, cancellation, termination or modification of any
material Governmental Authorization.
3.11 CERTAIN BUSINESS PRACTICES. Except as set forth in Part 3.11 of the
Parent Disclosure Schedule, neither Parent nor any of its Subsidiaries has: (a)
used any funds for unlawful contributions, gifts or entertainment, or for other
unlawful expenses, related to political activity; (b) made any unlawful payment
to foreign or domestic government officials or employees or to foreign or
domestic political parties or campaigns; or (c) violated any provision of the
Foreign Corrupt Practices Act of 1977, as amended.
3.12 TRANSACTIONS WITH AFFILIATES. To the Knowledge of Parent, between the
date of Parent's last annual report filed with the SEC and the date of this
Agreement, no event has occurred that would be required to be reported by Parent
pursuant to Item 7.B of Form 20-F promulgated by the SEC.
3.13 AUTHORITY; BINDING NATURE OF AGREEMENT.
(A) Parent has the requisite corporate power and authority to enter
into and to perform its obligations under this Agreement. The execution and
delivery of this Agreement by Parent and the consummation by Parent of the
transactions contemplated by this Agreement have been duly authorized by
all necessary corporate action on the part of Parent, and no other
corporate proceedings on the part of Parent are necessary to authorize this
Agreement. This Agreement has been duly and validly executed and delivered
on behalf of Parent and, assuming the due authorization, execution and
delivery of this Agreement on behalf of the Company, constitutes the valid
and binding obligation of Parent, enforceable against Parent in accordance
with its terms, subject to (i) laws of general application relating to
bankruptcy, insolvency and the relief of debtors, and (ii) rules of law
governing specific performance, injunctive relief and other equitable
remedies. Merger Sub is a newly formed, wholly owned Subsidiary of Parent
and has the requisite corporate power and authority to enter into and to
perform its obligations under this Agreement. The execution and delivery of
this Agreement by Merger Sub and the consummation by Merger Sub of the
transactions contemplated by this Agreement have been duly authorized by
all necessary corporate action on the part of Merger Sub, and no other
corporate proceedings on the part of Merger Sub are necessary to authorize
this Agreement other than, with respect to the Merger, the filing and
recordation of the appropriate merger documents as required by the DGCL.
Parent, as the sole stockholder of Merger Sub, will vote to adopt this
Agreement immediately after the execution and delivery of this Agreement.
This Agreement has been duly and validly executed and delivered by Merger
Sub and, assuming the due authorization, execution and delivery of this
Agreement on behalf of the Company, constitutes the valid and binding
obligation of Merger Sub, enforceable against Merger Sub in accordance with
its terms, subject to (i) laws of general application relating to
bankruptcy, insolvency and the relief of debtors, and (ii) rules of law
governing specific performance, injunctive relief and other equitable
remedies.
(B) The Board of Directors of Parent has (i) determined that the
transactions contemplated by this Agreement are fair to and in the best
interests of Parent and its shareholders, and (ii) authorized and approved
the execution, delivery and performance of this Agreement by Parent. The
Board of Directors of Merger Sub has (A) determined that the transactions
contemplated by this Agreement are fair to and in the best interests of
Merger Sub and its stockholder, and (B) authorized and approved the
execution, delivery and performance of this Agreement by Merger Sub.
3.14 NON-CONTRAVENTION; CONSENTS. The execution and delivery of this
Agreement by Parent and Merger Sub and the consummation by Parent and Merger Sub
of the Merger and the other transactions contemplated by this Agreement will not
directly or indirectly (with or without notice or lapse of time):
(A) contravene, conflict with or result in a violation of (i) any of
the provisions of the Organizational Documents of Parent or Merger Sub, or
(ii) any resolution adopted by the stockholders or the board of directors,
or any committee thereof, of Parent or Merger Sub;
(B) contravene, conflict with or result in a violation in any material
respect or breach of, or result in a default in any material respect under,
any provision of any Parent Material Contract (including the Facility
Agreement); or give any Person the right to (i) declare a default or
exercise any remedy under the Parent Material Contract, or (ii) accelerate
the maturity or performance in any material respect of any obligation under
the Parent Material Contract;
(C) contravene, conflict with or result in a violation of, or give any
Governmental Entity the right to challenge the Merger or to exercise any
remedy or obtain any relief under, any Legal Requirement or any Order,
except (i) under applicable antitrust laws, and (ii) for conflicts or
violations which would not, individually or in the aggregate, reasonably be
expected to have a material adverse effect on Parent or Merger Sub's
ability to consummate the Merger;
(D) contravene, conflict with or result in a violation of any of the
terms or requirements of, or give any Governmental Entity the right to
revoke, withdraw, suspend, cancel, terminate or modify, any material
Governmental Authorization that is held by Parent or Merger Sub or that
otherwise relates to the business of any of Parent or Merger Sub or to any
material assets owned or leased by any of Parent or Merger Sub;
(E) result in the imposition or creation of any Encumbrance upon or
with respect to any asset owned or used by Parent or Merger Sub (except for
Permitted Encumbrances); or
(F) result in the transfer of any material asset of Parent or Merger
Sub to any Person.
Except as may be required by the Exchange Act, the DGCL, or the antitrust or
competition laws of foreign jurisdictions, neither Parent nor Merger Sub, nor
any of Parent's other Affiliates, is required to make any filing with or to
obtain any consent from any Person at or prior to the Effective Time in
connection with the execution and delivery of this Agreement by Parent or Merger
Sub or the consummation by Parent or Merger Sub of any of the transactions
contemplated by this Agreement, except where the failure to make any such filing
or obtain any such consent would not materially and adversely affect Parent's or
Merger Sub's ability to consummate any of the transactions contemplated by this
Agreement. No vote of Parent's shareholders is necessary to adopt this Agreement
or to approve any of the transactions contemplated by this Agreement.
3.15 NOT AN INTERESTED STOCKHOLDER. Neither Parent nor any of its
"affiliates" or "associates" is or has been during the past three years an
"interested stockholder" (as such term is defined in Section 203 of the DGCL) of
the Company.
3.16 OWNERSHIP OF SHARES. Neither Parent nor any of Parent's Affiliates
directly or indirectly owns, and at all times during the past three years,
neither Parent nor any of Parent's Affiliates has owned, beneficially or
otherwise, any shares of Company Common Stock or any securities, contracts or
obligations convertible into or exercisable or exchangeable for shares of
Company Common Stock.
3.17 BROKERS. No broker, finder or investment banker (other than Citigroup
Global Markets, Inc.) is entitled to any brokerage, finder's or other similar
fee or commission in connection with the transactions contemplated by this
Agreement based upon arrangements made by or on behalf of the Parent.
3.18 ACTIVITIES OF MERGER SUB. Merger Sub was formed solely for the purpose
of effecting the Merger and the other transactions contemplated by this
Agreement. Merger Sub has engaged in no activities other than those contemplated
by this Agreement and has no liabilities other than those contemplated by this
Agreement.
3.19 REGISTRATION STATEMENT/PROXY STATEMENT. The written information to be
supplied by the Parent for inclusion in the Proxy Statement/Prospectus shall not
on the date the Proxy Statement/Prospectus is first mailed to the stockholders
of the Company, at the time of the Company Stockholders Meeting and at the
Effective Time, (i) contain any untrue statement of a material fact, (ii) omit
to state any material fact required to be stated therein or necessary in order
to make the statements contained therein, in light of the circumstances under
which they were made, not misleading, or (iii) omit to state any material fact
necessary to correct any statement in any earlier written communication
constituting a solicitation of proxies by the Company for the Company
Stockholders Meeting which has in the interim become false or misleading in any
material respect.
SECTION 4. COVENANTS
4.1 INTERIM OPERATIONS OF THE PARTIES.
(A) During the period from the date of this Agreement through the
earlier of the Effective Time or the termination of this Agreement, each of
the parties shall ensure that it and each of its Subsidiaries shall:
(I) use reasonable efforts to conduct its business in
substantially the same manner in which such business was being
conducted prior to the date of this Agreement;
(II) use commercially reasonable efforts to ensure that it
preserves intact its current business organization, keeps available
the services of its present officers and other employees and preserves
its relations and goodwill with suppliers, customers, landlords,
creditors, licensors, licensees, employees and other entities having
business relationships with it and with all relevant Governmental
Entities;
(III) keep in full force all its insurance policies (except for
replacement of insurance policies providing substantially similar
levels of coverage); and
(IV) in the case of the Company promptly notify Parent of any
event that would have a Material Adverse Effect on the Company and in
the case of Parent, promptly notify the Company of any event that
would have a Material Adverse Effect on Parent.
(B) The Company agrees that, during the period from the date of this
Agreement through the earlier of the Effective Time or the termination of
this Agreement, except (1) to the extent Parent shall otherwise consent in
writing (such consent not to be unreasonably withheld) or (2) as set forth
in Part 4.1(b) of the Company Disclosure Schedule, the Company shall not
and shall not permit any of its Subsidiaries to:
(I) amend its Organizational Documents;
(II) split, combine or reclassify any shares of capital stock;
(III) declare, set aside or pay any dividend (whether payable in
cash, stock or property) with respect to any capital stock or other
securities;
(IV) (A) form any Subsidiary; (B) or acquire any equity interest
in any other Entity; or (C) effect or become a party to any merger,
consolidation, plan of arrangement, share exchange, business
combination, amalgamation, recapitalization, reclassification of
shares, stock split, reverse stock split, issuance of bonus shares,
division or subdivision of shares, consolidation of shares or similar
transaction;
(V) issue or authorize the issuance of any additional shares of,
or securities convertible or exchangeable for, or options, warrants or
rights to acquire, any shares of its capital stock, other than (A)
shares of Company Common Stock issuable upon exercise of Company
Options or Company Warrants, or upon conversion of the Convertible
Notes, outstanding on the date of this Agreement or (B) up to 70,000
shares (subject to adjustment for any stock split, reverse stock split
or other similar event affecting the Company Common Stock after the
date of this Agreement) of Company Common Stock subject to options or
other equity awards under the Company Equity Plan issued in the
ordinary course of business to employees (other than directors or
executive officers of the Company);
(VI) amend or waive any right under any Company Option, Company
Warrant or the Convertible Notes;
(VII) (A) acquire any asset (tangible or intangible) for a
purchase price exceeding $200,000 or assets (tangible or intangible)
for an aggregate purchase price exceeding $600,000 (other than the
acquisition of raw materials or supplies in the ordinary course of
business consistent with past practice, capital expenditures not
prohibited by clause "(xvi)" below and non-exclusive licenses of
Intellectual Property Rights in the ordinary course of business); (B)
sell or otherwise dispose of any material asset (including, without
limitation, the membership interest (all or a portion) in HHNEC and
any other asset valued in excess of $250,000), other than the license
of Intellectual Property Rights not prohibited by clause "(xii)" below
and the sale of finished goods inventory in the ordinary course of
business consistent with past practice, scrapped inventory and the
disposal of obsolete equipment consistent with past practice; (C)
enter into a lease or a license of any assets of the Company or any of
its Subsidiaries involving the payment of $500,000 over the term of
the lease or license (other than the replacement or renewal of
existing licenses or leases and the license of Intellectual Property
Rights not prohibited by clause "(xii)" below or capital leases not
prohibited by clauses "(ix)" and "(xvi)" below); or (D) knowingly
waive or relinquish any rights outside of the ordinary course of
business;
(VIII) repurchase, redeem or otherwise acquire any shares,
options, warrants, rights to acquire any shares of the Company's
capital stock (except shares repurchased from employees or former
employees pursuant to the exercise of repurchase rights) or securities
convertible into shares of the Company's capital stock (including the
Convertible Notes);
(IX) incur any indebtedness for borrowed money or guarantee any
such indebtedness, except for (A) borrowings (including letters of
credit) under the Loan and Security Agreement with Wachovia Capital
Finance Corporation (Western) up to $13,000,000 in the aggregate,
subject to the Company providing Parent with advance written notice
of: (1) the first drawdown or letter of credit that brings the
outstanding balance (including letters of credit) to $10,000,000 or
more; and (2) each drawdown or letter of credit thereafter, and (B)
purchase money financings and capital leases entered into in the
ordinary course of business;
(X) (A) establish, adopt or amend any employee benefit (including
health) or pension plans or employment agreements (other than
amendments required by applicable Legal Requirements), (B) pay any
bonus or make any profit sharing payment, cash incentive payment or
similar payment to, or increase the compensation or fringe benefits of
any director, officer or employee of the Company or any of its
Subsidiaries (except for (1) payments pursuant to existing agreements
or plans, (2) amendments determined by the Company in good faith to be
required to comply with applicable Legal Requirements, (3) increases
required pursuant to the Labor Agreements or any benefit plan of the
Company and its Subsidiaries in effect on the date hereof, and (4)
salary increases and bonuses to non-executive employees in the
ordinary course of business), (C) hire any new officer, (D) terminate
any existing officers or any other person listed on Part 4.1(b)(x) of
the Company Disclosure Schedule (other than terminations for cause),
or (E) grant any severance pay or termination pay to any officers or
employees, except pursuant to existing agreements or in accordance
with existing written company policies;
(XI) (A) enter into or become bound by, or permit any of the
assets owned or used by it to become by, any contact that, if entered
into prior to the date of this Agreement, would be a Material Contract
(except for (1) contracts relating to the acquisition or disposition
of assets, licenses or leases not otherwise prohibited by this Section
4.1, (2) settlement agreements not prohibited by clause (xviii), (3)
amendments to, or consents under, any Material Contracts necessary in
connection with the Merger, and (4) a new or amended collective
bargaining agreement with the International Brotherhood of Electrical
Workers consistent with those certain letters of understanding, each
dated as of May 2, 2008, subject to the Company giving Parent and
Parent's counsel a reasonable opportunity to review and comment on any
such agreement), or (B) amend, renew or prematurely terminate any
Material Contracts or knowingly waive, release or assign any material
rights or claims under any Material Contracts (except in the ordinary
course of business and except for amendments or consents necessary in
connection with the Merger);
(XII) (A) abandon, disclaim, dedicate to the public, sell, assign
or grant any security interest (other than Permitted Encumbrances) in,
to or under any Intellectual Property Rights of the Company or a
Subsidiary of the Company, including failing to perform or cause to be
performed all applicable filings, recordings and other acts, or to pay
or cause to be paid all required fees and taxes, to maintain and
protect its interest in such Intellectual Property Rights, except as
set forth in Part 2.6(d)(ii) of the Company Disclosure Schedule, (B)
grant to any third party any license with respect to Intellectual
Property Rights of the Company or a Subsidiary of the Company, except
in the ordinary course of business, (C) develop, create or invent any
Intellectual Property jointly with any third-party except in the
ordinary course of business or in accordance with the terms of
existing agreements or arrangements, or (D) fail to notify Parent
promptly of any material infringement, misappropriation or other
violation of the Intellectual Property Rights of the Company or a
Subsidiary of the Company of which the Company or its Subsidiary
obtains Knowledge and to consult with Parent regarding the actions (if
any) to take to protect such Intellectual Property Rights;
(XIII) lend money to any Person (except that the Company and its
Subsidiaries may make advances to employees, officers, directors or
independent contractors for business expenses and the Company may
allow employees to acquire shares of Company Common Stock in exchange
for promissory notes upon exercise of Company Options, in each case in
the ordinary course of business and consistent with past practice);
(XIV) change any of its methods of tax or financial accounting or
accounting practices in any material respect other than changes
required by applicable law or under GAAP;
(XV) make, change or revoke any material tax election, amend any
material Tax Return, enter into any closing agreement with respect to
a material amount of Taxes, settle any material tax claim or
assessment; surrender any right to claim a refund of a material amount
of Taxes, obtain any Tax ruling or consent to any waiver or extension
of the statute of limitations for the assessment of Taxes or take any
action or fail to take any action that would be reasonably likely to
cause the Merger to fail to qualify as a reorganization within the
meaning of Section 368(a) of the Code;
(XVI) make any capital expenditure that is not contemplated by
the capital expenditure budget set forth in Part 4.1(b)(xvi) of the
Company Disclosure Schedule (a "NON-BUDGETED CAPITAL EXPENDITURE"),
except that the Company or any Subsidiary of the Company (A) may make
any Non-Budgeted Capital Expenditure that does not individually exceed
$200,000 in amount, and that (B) when added to all other Non-Budgeted
Capital Expenditures made by the Company and its Subsidiaries since
the date of this Agreement, would not exceed $750,000 in the
aggregate;
(XVII) commence any Legal Proceeding, except with respect to
routine collection matters in the ordinary course of business and
consistent with past practices or to enforce its rights under this
Agreement;
(XVIII) settle or discharge any Legal Proceeding or other claim
or dispute or settle any third-party Legal Proceeding with respect to
the transactions contemplated by this Agreement, except where the only
obligations incurred by the Company are payments below $100,000 in the
aggregate;
(XIX) (A) extend the payment terms of any customer, provide
credit to any customer (or any price adjustment) or make customer
concessions, or (B) advance payment terms of any supplier or service
provider, in each case except in the ordinary course of business and
consistent with past practice; or
(XX) enter into an agreement to take any of the actions described
in this Section 4.1(b).
(C) Parent agrees that, during the period from the date of this
Agreement through the earlier of the Effective Time or the termination of
this Agreement, except (1) to the extent the Company shall otherwise
consent in writing (such consent not to be unreasonably withheld) or (2) as
set forth in Part 4.1(c) of the Parent Disclosure Schedule, Parent shall
not and shall not permit Merger Sub or any of its other Subsidiaries to:
(I) amend its Organizational Documents;
(II) declare, set aside or pay any dividend (whether payable in
cash, stock or property) with respect to any capital stock or other
securities;
(III) (A) form any Subsidiary; (B) or acquire any equity interest
in any other Entity; or (C) effect or become a party to any merger,
consolidation, plan of arrangement, share exchange, business
combination, amalgamation, recapitalization, reclassification of
shares, issuance of bonus shares or similar transaction;
(IV) repurchase, redeem or otherwise acquire any shares, options,
warrants or rights to acquire any shares of capital stock (except
shares repurchased from employees or former employees pursuant to the
exercise of repurchase rights);
(V) change any of its methods of accounting or accounting
practices in any material respect other than changes required under
GAAP;
(VI) take any action or fail to take any action that would be
reasonably likely to cause the Merger to fail to qualify as a
reorganization within the meaning of Section 368(a) of the Code; or
(VII) enter into an agreement to take any of the actions
described in this Section 4.1(c).
4.2 NO SOLICITATION.
(A) From and after the date of this Agreement until the earlier of the
Effective Time or the termination of this Agreement in accordance with its
terms, the Company, its Subsidiaries and their respective directors and
officers will not, and the Company will use commercially reasonable efforts
to ensure that its and its Subsidiaries' non-officer employees, affiliates,
agents, attorneys, accountants, financial advisors and other advisors and
representatives do not, directly or indirectly: (i) solicit or initiate, or
induce, encourage or knowingly facilitate the making, submission or
announcement of any Alternative Acquisition Proposal or Alternative
Acquisition Inquiry; (ii) except as otherwise provided below, furnish any
information regarding the Company or its Subsidiaries to any third party in
connection with or in response to any Alternative Acquisition Proposal or
Alternative Acquisition Inquiry; (iii) except as otherwise provided below,
enter into, participate, engage, maintain or continue in any discussions or
negotiations with any third party concerning any Alternative Acquisition
Proposal or Alternative Acquisition Inquiry; or (iv) except in accordance
with Section 4.4(c), approve, endorse or recommend any Alternative
Acquisition Proposal or Alternative Acquisition Inquiry;, enter into any
letter of intent or similar document or any contract, agreement or
commitment contemplating or otherwise relating to any Alternative
Acquisition Transaction; provided, however, that, the Company and its
officers, directors, employees, affiliates, investment bankers, financial
advisors, attorneys, accounts or other advisors or representatives may, at
any time prior to the adoption of this Agreement by the holders of Company
Common Stock, take any of the actions otherwise prohibited by clause "(ii)"
or clause "(iii)" of this Section 4.2(a) in connection with or in response
to any Alternative Acquisition Proposal if the Company's Board of Directors
determines in good faith that such Alternative Acquisition Proposal (which
has not been withdrawn) constitutes or could reasonably be expected to lead
to a Superior Proposal, if (in each case) (1) the Company's Board of
Directors determines in good faith (after consultation with the Company's
financial advisor and outside legal counsel) that such action is required
in order for the Board of Directors of the Company to comply with its
fiduciary duties to the Company's stockholders under applicable law, (2)
neither the Company nor its representatives shall have breached the
provisions set forth in this Section 4.2 in connection with such
Alternative Acquisition Proposal, (3) at least forty-eight (48) hours prior
to taking any of the actions otherwise prohibited by clause "(ii)" or
clause "(iii)" of this Section 4.2(a) in connection with or in response to
any Alternative Acquisition Proposal, the Company gives Parent written
notice of the identity of the third party making such Alternative
Acquisition Proposal, the terms thereof and of the Company's intention to
take such actions, (4) prior to furnishing any confidential information
regarding the Company or its Subsidiaries to any third party in connection
with or in response to any Alternative Acquisition Proposal, the Company
receives from such third party an executed confidentiality agreement
containing limitations on the use and disclosure of confidential
information furnished to such third party by the Company that are no less
favorable to the Company than the provisions of the Confidentiality
Agreement, and (5) prior to providing any such confidential information to
such third party, the Company furnishes such confidential information to
Parent (to the extent such confidential information has not been previously
furnished by the Company to Parent). Upon the execution and delivery of
this Agreement, the Company will immediately cease and cause to be
terminated any and all existing activities, discussions and negotiations
with any third party relating to any Alternative Acquisition Proposal or
any Alternative Acquisition Inquiry. The Company agrees not to release (and
to cause its Subsidiaries not to release) any third party from, and not to
waive (and to cause its Subsidiaries not to waive) any provision of, any
confidentiality, non-disclosure, non-solicitation, no hire, "standstill" or
similar contract to which any of the Company or its Subsidiaries is a party
and will cause each such agreement to be enforced to the extent requested
by Parent. Without limiting the generality of the foregoing, the Company
acknowledges and agrees that any action inconsistent with any of the
provisions of this Section 4.2(a) by any director or officer of the Company
or any of Subsidiaries, whether or not such director or officer is
purporting to act on behalf of the Company, shall be deemed to constitute a
breach of this Section 4.2(a) by the Company.
(B) If any Alternative Acquisition Proposal or Alternative Acquisition
Inquiry is made or submitted by any Person or "group" (as defined in the
Exchange Act and the rules promulgated thereunder) prior to the Closing
Date, then the Company shall as promptly as practicable after receipt of
such Alternative Acquisition Proposal or Alternative Acquisition Inquiry
(and in any event within one (1) business day after any of the Company's
executive officers or directors becomes aware of any such Alternative
Acquisition Proposal or Alternative Acquisition Inquiry) advise Parent in
writing of such Alternative Acquisition Proposal or Alternative Acquisition
Inquiry (including the identity of the third party making or submitting
such Alternative Acquisition Proposal or Alternative Acquisition Inquiry,
and the terms and conditions thereof, together with a copy of any written
materials provided to the Company by such third party). The Company shall
keep Parent reasonably informed with respect to: (i) the status of any such
Alternative Acquisition Proposal or Alternative Acquisition Inquiry; and
(ii) the status and terms of any modification or proposed modification
thereto. Furthermore, the Company shall provide Parent with at least two
(2) business days' prior written notice (or, if less than two (2) business
days, such prior notice as is provided to the members of the Company's
Board of Directors) of any meeting of the Company's Board of Directors at
which the Board of Directors of the Company is reasonably expected to
consider any Alternative Acquisition Proposal or Alternative Acquisition
Inquiry or to recommend a Superior Proposal to the Company's stockholders,
and in each case together with such notice a copy of any definitive
documentation relating to such Superior Proposal.
(C) Nothing contained in this Section 4.2 or elsewhere in this
Agreement shall prohibit the Company or its Board of Directors from
complying with Rule 14d-9, Rule 14e-2 or Item 1012(a) of Regulation M-A
under the Exchange Act or from furnishing a copy or excerpts of this
Agreement (excluding, however, the Company Disclosure Schedule and the
Parent Disclosure Schedule) to any third party (or the representatives of
such third party) that makes any Alternative Acquisition Proposal or
Alternative Acquisition Inquiry.
4.3 REGISTRATION STATEMENT; PROXY STATEMENT/PROSPECTUS.
(A) As promptly as reasonably practicable following the date of this
Agreement, Parent and the Company shall prepare the Proxy
Statement/Prospectus and Parent shall prepare and cause to be filed with
the SEC the Registration Statement, in which the Proxy Statement/Prospectus
will be included as a prospectus. Each of Parent and the Company shall use
commercially reasonable efforts to cause the Registration Statement and the
Proxy Statement/Prospectus to comply as to form and substance as to such
party in all material respects with the rules and regulations promulgated
by the SEC, the Nasdaq Global Market and the American Stock Exchange,
respond promptly to any comments of the SEC or its staff and use all
reasonable efforts to have the Registration Statement declared effective
under the Securities Act as promptly as practicable after it is filed with
the SEC, and the Company will cause the Proxy Statement/Prospectus to be
mailed to the holders of Company Common Stock at the earliest practicable
time after the Registration Statement is declared effective by the SEC.
Each of Parent, Merger Sub and the Company shall promptly furnish to the
other party such information regarding itself and its business and
financial statements and affairs as, in the reasonable judgment of the
providing party or its counsel, may be required or appropriate for
inclusion in the Proxy Statement/Prospectus and the Registration Statement,
or in any amendments or supplements thereto, and cause its counsel and
auditors to cooperate with the other's counsel and auditors in the
preparation of the Proxy Statement/Prospectus and the Registration
Statement. To the extent required by the applicable requirements of the
Securities Act and the Exchange Act and, in each case, the rules and
regulations thereunder, (i) Parent and the Company shall promptly correct
any information provided by it for use in the Proxy Statement/Prospectus or
Registration Statement if such information shall have become false or
misleading in any material respect; and (ii) Parent and the Company shall
take all steps necessary to promptly cause the Proxy Statement/Prospectus
or Registration Statement, as the case may be, as supplemented or amended
to correct such information, to be filed with the SEC and to be
disseminated to holders of Company Common Stock. Parent shall promptly
provide the Company and its counsel with a copy or description of any
comments received by Parent (or its counsel) from the SEC or its staff with
respect to the Registration Statement, or of any request by the SEC or its
staff for amendments or supplements to the Registration Statement or for
additional information. Parent shall respond promptly to any comments of
the SEC or its staff with respect to the Registration Statement and give
the Company and the Company's counsel a reasonable opportunity to review
and comment on any response to such comments provided to the SEC or its
staff. The Company shall promptly provide Parent and its counsel with a
copy or description of any comments received by the Company (or its
counsel) from the SEC or its staff with respect to the Proxy
Statement/Prospectus, or of any request by the SEC or its staff for
amendments or supplements to the Proxy Statement/Prospectus or for
additional information. The Company shall respond promptly to any comments
of the SEC or its staff with respect to the Proxy Statement/Prospectus and
give Parent and Parent's counsel a reasonable opportunity to review and
comment on any response to such comments provided to the SEC or its staff.
(B) Prior to the Effective Time, Parent shall use reasonable efforts
to obtain all regulatory approvals needed to ensure that the Parent
Ordinary Shares to be issued in the Merger will be registered or qualified
under the securities law of every jurisdiction of the United States in
which any registered holder of Company Common Stock has an address of
record on the record date for determining the stockholders entitled to
notice of and to vote at the Company Stockholders Meeting.
(C) The Proxy Statement/Prospectus will include the Company Board
Recommendation, subject to the right of the Board of Directors of the
Company to withhold, withdraw, modify, amend, change, rescind, condition or
qualify the Company Board Recommendation in compliance with Section 4.4(c).
4.4 MEETING OF THE COMPANY'S STOCKHOLDERS.
(A) The Company shall (subject to applicable Legal Requirements and
the requirements of its Organizational Documents) take all action necessary
to convene a meeting of holders of Company Common Stock to vote to adopt
this Agreement (the "COMPANY STOCKHOLDERS MEETING") and, subject to the
right of the Board of Directors of the Company to withhold, withdraw,
modify, amend, change, rescind, condition or qualify the Company Board
Recommendation in compliance with Section 4.4(c), shall use its
commercially reasonable efforts to solicit from its stockholders proxies in
favor of the adoption of this Agreement. The Company Stockholders Meeting
shall be held (on a date selected by the Company in consultation with
Parent) as promptly as reasonably practicable after the Registration
Statement is declared effective under the Securities Act. The Company may
delay the Company Stockholders Meeting if, as of the time for which the
Company Stockholders Meeting is originally scheduled, the Company believes
that there are or will be insufficient stockholders represented (either in
person or by proxy) to constitute the minimum legal quorum necessary to
conduct the business at the Company Stockholders Meeting. The Company shall
use commercially reasonable efforts to ensure that the Company Stockholders
Meeting is called, noticed, convened, held and conducted, and that all
proxies solicited by the Company in connection with the Company
Stockholders Meeting are solicited, in compliance with the DGCL, the
Company's Organizational Documents, the rules of the American Stock
Exchange and all other applicable Legal Requirements. The Company's
obligation to call, give notice of, convene and hold the Company
Stockholders Meeting in accordance with this Section 4.4(a) shall not be
limited or otherwise affected by the commencement, disclosure, announcement
or submission to the Company of any Alternative Acquisition Proposal or any
withholding, withdrawal, modification, amendment or change in the Company
Board Recommendation or any other determination subsequent to the date
hereof by the Company's Board of Directors that it can no longer make the
Company Board Recommendation.
(B) The Board of Directors of the Company shall recommend adoption of
this Agreement by the holders of Company Common Stock (the "COMPANY BOARD
RECOMMENDATION"), and unless the Board of Directors of the Company shall
have withheld, withdrawn, modified, amended, changed, rescinded,
conditioned or qualified the Company Board Recommendation in compliance
with Section 4.4(c), the Company shall include in the Proxy
Statement/Prospectus a statement to the effect that the Board of Directors
of the Company recommends that the holders of Company Common Stock vote to
adopt this Agreement, and (ii) the Company shall take all lawful action to
solicit from the holders of Company Common Stock proxies in favor of the
adoption of this Agreement and to secure the vote or consent of its
stockholders required by the rules of the American Stock Exchange and the
DGCL. Neither the Company's Board of Directors nor any committee thereof
shall withhold, withdraw, modify, amend, change, rescind, condition or
qualify or publicly propose to withhold, withdraw, modify, amend, change,
rescind, condition or qualify, in a matter adverse to Parent or Merger Sub,
the Company Board Recommendation, except in compliance with Section 4.4(c).
At the Company Stockholders Meeting, Parent shall ensure that all shares of
Company Common Stock owned beneficially or of record by Parent, Merger Sub
or any of Parent's other Affiliates will be voted in favor of the adoption
of this Agreement.
(C) Notwithstanding anything to the contrary contained in this
Agreement, at any time prior to the adoption of this Agreement by the
stockholders of the Company, the Company's Board of Directors may withhold,
withdraw, modify, amend, change, rescind, condition or qualify the Company
Board Recommendation if: (i) neither the Company nor its representatives
shall have breached the provisions set forth in Section 4.2 in connection
with the proposed withholding, withdrawal, modification, amendment,
changing, rescission, conditioning or qualification of the Company Board
Recommendation; (ii) the Company shall have provided to Parent at least two
(2) business days' prior written notice (or, if less than two (2) business
days, such prior notice as is provided to the members of the Company's
Board of Directors) of any meeting of the Company's Board of Directors at
which such Board of Directors is reasonably expected to consider the
possibility of withholding or withdrawing the Company Board Recommendation
or modifying, amending, changing, rescinding, conditioning or qualifying
the Company Board Recommendation in a manner adverse to Parent, together
with reasonably detailed information regarding the circumstances giving
rise to the consideration of such possibility and the opportunity to
discuss such circumstances with Parent and its legal counsel and financial
advisor; and (iii) the Company's Board of Directors determines in good
faith that (after consultation with the Company's outside legal counsel and
its financial advisor) that, other than solely by reason of a decline in
Parent's stock price, in and of itself, withholding, withdrawing,
modifying, amending, changing, rescinding, conditioning or qualifying the
Company Board Recommendation is required in order for the Board of
Directors of the Company to comply with its fiduciary duties to the
Company's stockholders under applicable law. The Company shall notify
Parent promptly (and in any event within two hours) of: (A) any
withholding, withdrawal, modification, amendment, changing, rescinding,
conditioning or qualifying of the Company Board Recommendation; and (B) the
circumstances and details surrounding such withholding, withdrawal,
modification, amendment, change, rescission, conditioning or qualification.
Nothing contained in this Section 4.4 shall limit the Company's obligation
to hold and convene the Company Stockholders Meeting (regardless of whether
the Company Board Recommendation shall have been withheld, withdrawn,
modified, amended, changed, rescinded, conditioned or qualified).
4.5 FILINGS; OTHER ACTION.
(A) Each of the Company, Parent and Merger Sub shall: (i) promptly
make and effect all registrations, filings and submissions required to be
made or effected by it pursuant to the Exchange Act and other applicable
Legal Requirements with respect to the Merger; and (ii) use commercially
reasonable efforts to take or cause to be taken, on a timely basis, all
other actions, and to do, or cause to be done, and to assist and cooperate
with the other parties in doing, all things necessary, proper or advisable
for the purpose of consummating and effectuating, in an expeditious manner,
the transactions contemplated by this Agreement. Without limiting the
generality of the foregoing, each of the Company, Parent and Merger Sub (A)
shall promptly provide all information requested by any Governmental Entity
in connection with the Merger or any of the other transactions contemplated
by this Agreement, and (B) shall use commercially reasonable efforts to
promptly take, and cause its Affiliates to take, all actions and steps
necessary to obtain any clearance or approval required to be obtained from
the U.S. Federal Trade Commission, the U.S. Department of Justice, any
state attorney general, any foreign competition authority or any other
Governmental Entity in connection with the transactions contemplated by
this Agreement. Notwithstanding anything herein to the contrary, nothing in
this Agreement shall be deemed to require Parent or any Subsidiary or
affiliate of Parent (x) to agree to any divestiture by itself or the
Company or any of their respective Subsidiaries or affiliates of shares of
capital stock or of any material portion of its or the Company's business,
assets or property, or the imposition of any material limitation on the
ability of any of them to conduct their business or to own or exercise
control of such assets, properties and stock, or (y) to take any similar or
other material action under this Section 4.5 requested by any Governmental
Entity that has the authority to enforce any antitrust or competition law
and that seeks, or authorizes its staff to seek, a preliminary injunction
or restraining order to enjoin the consummation of the Merger.
(B) Without limiting the generality of anything contained in Section
4.5(a) or Section 4.5(c), each party hereto shall (i) give the other
parties prompt notice of the making or commencement of any request,
inquiry, investigation, action or Legal Proceeding by or before any
Governmental Entity with respect to the Merger or any of the other
transactions contemplated by this Agreement, (ii) keep the other parties
informed as to the status of any such request, inquiry, investigation,
action or Legal Proceeding, and (iii) promptly inform the other parties of
any communication to or from the Federal Trade Commission, the Department
of Justice or any other Governmental Entity regarding the Merger. Each
party hereto will consult and cooperate with the other parties and will
consider in good faith the views of the other parties in connection with
any analysis, appearance, presentation, memorandum, brief, argument,
opinion or proposal made or submitted in connection with any such request,
inquiry, investigation, action or Legal Proceeding. In addition, except as
may be prohibited by any Governmental Entity or by any Legal Requirement,
in connection with any such request, inquiry, investigation, action or
Legal Proceeding, each party hereto will permit authorized representatives
of the other parties to be present at each meeting or conference relating
to such request, inquiry, investigation, action or Legal Proceeding and to
have access to and be consulted in connection with any document, opinion or
proposal made or submitted to any Governmental Entity in connection with
such request, inquiry, investigation, action or Legal Proceeding.
(C) Without limiting the generality of anything contained in Section
4.5(a) or Section 4.5(b), the Company, Parent and Merger Sub shall use
commercially reasonable efforts to cause all conditions to the Merger to be
satisfied on a timely basis (to the extent the satisfaction of such
conditions is within such party's direct or indirect control).
(D) The Company shall give prompt notice to Parent upon becoming aware
that any representation or warranty made by it contained in this Agreement
(other than any such representation or warranty speaks as of the date of
this Agreement or any other specific date prior to the date of this
Agreement) has become untrue or inaccurate, or of any failure of the
Company to comply with or satisfy in any material respect any covenant or
agreement required to be complied with or satisfied by it under this
Agreement prior to the Closing, in each case, where such untruth,
inaccuracy or failure would result in the conditions set forth in Section
5.2(a) or Section 5.2(b) not being satisfied; PROVIDED, HOWEVER, that no
such notification shall affect the representations, warranties, covenants
or agreements of the parties or the conditions to the obligations of the
parties under this Agreement.
(E) Parent shall give prompt notice to the Company upon becoming aware
that any representation or warranty made by it or Merger Sub contained in
this Agreement (other than any such representation or warranty speaks as of
the date of this Agreement or any other specific date prior to the date of
this Agreement) has become untrue or inaccurate, or of any failure of
Parent or Merger Sub to comply with or satisfy in any material respect any
covenant or agreement required to be complied with or satisfied by it under
this Agreement prior to the Closing, in each case, where such untruth,
inaccuracy or failure would result in the conditions set forth in Section
5.3(a) or Section 5.3(b) not being satisfied; PROVIDED, HOWEVER, that no
such notification shall affect the representations, warranties, covenants
or agreements of the parties or the conditions to the obligations of the
parties under this Agreement.
(F) As soon as practicable following the date hereof, Parent and the
Company will each use its commercially reasonable efforts to obtain any
consents, waivers and approvals under any of its or its Subsidiaries'
respective agreements, contracts, licenses or leases required to be
obtained in connection with the consummation of the transactions
contemplated hereby.
(G) Subject to any restrictions that may be imposed by United States
Governmental Entities, the Company will coordinate with Parent in
connection with all notifications and discussions with the Department of
Defense concerning its Trusted Foundry Status or security clearance,
including: notifying Parent prior to any such actions, giving Parent the
opportunity to review written communications with the Department of
Defense, and providing Parent with the opportunity to participate in
discussions with the Department of Defense.
4.6 ACCESS. Upon reasonable notice, the Company shall afford Parent's
officers and other authorized employees and representatives (including
accountants and counsel) reasonable access, during normal business hours, upon
reasonable notice, throughout the period prior to the earlier of the Effective
Time or the termination of this Agreement in accordance with its terms, to the
Company's properties, books, records and personnel and, during such period, the
Company shall furnish promptly to Parent all readily available information
concerning its business (including the status of product development efforts,
properties, results of operations and personnel) as Parent may reasonably
request; PROVIDED, HOWEVER, that the Company shall not be required to permit any
inspection or other access, or to disclose any information, where such
inspection, access or disclosure would jeopardize protections afforded the
Company under the attorney-client privilege or the attorney work product
doctrine or violate any Legal Requirement or contractual obligation applicable
to the Company or any of its Subsidiaries or by which its or any of their
respective properties is bound or affected in any manner that would reasonably
be expected to cause the Company to lose any material benefit or incur any
material liability. Subject to the restrictions set forth in the proviso to the
preceding sentence, the parties hereto will use commercially reasonable efforts
to make appropriate substitute disclosure arrangements under circumstances in
which such restrictions apply. No information or knowledge obtained by Parent in
any investigation pursuant to this Section 4.6 will affect or be deemed to
modify any representation or warranty contained herein or the conditions to the
obligations of the parties to consummate the Merger. All information obtained by
Parent and its representatives pursuant to this Section 4.6 shall be treated as
"Confidential Information" for purposes of the Confidentiality Agreement.
4.7 INTERIM OPERATIONS OF MERGER SUB. During the period from the date of
this Agreement through the earlier of the Effective Time or the termination of
this Agreement, Merger Sub shall not engage in any activities of any nature
except as provided in or contemplated by this Agreement.
4.8 PUBLICITY. The initial press release relating to this Agreement shall
be a joint press release issued by the Company and Parent, and thereafter the
Company and Parent (and each of their respective executive officers and
directors, whether or not purporting to act on behalf of the Company or Parent,
as applicable) shall consult with each other and, to the extent practicable,
agree, prior to issuing any press releases or otherwise making public statements
with respect to this Agreement and the transactions contemplated by this
Agreement, except as may be required by applicable Legal Requirements or any
listing agreement with the Nasdaq or the American Stock Exchange, and prior to
making any filings with any Governmental Entity with respect to the transactions
contemplated by this Agreement; PROVIDED, HOWEVER, that the Company need not
consult with Parent in connection with any press release or public statement if,
prior to the date of such release or public statement, the Company shall have
withheld, withdrawn, modified, amended or changed the Company Board
Recommendation in compliance with Section 4.4(c). The Company shall consult with
Parent before issuing any press release or otherwise making any public statement
with respect to the Company's earnings or results of operations, and shall not
issue any such press release or make any such public statement prior to such
consultation.
4.9 COMPANY OPTIONS; COMPANY WARRANTS; EMPLOYEE BENEFITS.
(A) COMPANY OPTIONS. At the Effective Time, each outstanding Company
Option, whether or not vested, shall be assumed by Parent. Each Company
Option so assumed by Parent under this Agreement will continue to have, and
be subject to, the same terms and conditions of such Company Option
immediately prior to the Effective Time (including any repurchase rights or
vesting provisions and provisions regarding the acceleration of vesting on
certain transactions, other than the transactions contemplated by this
Agreement), except that (i) each Company Option will be exercisable (or
will become exercisable in accordance with its terms) for that number of
Parent Ordinary Shares equal to the product of the number of shares of
Company Common Stock that were issuable upon exercise of such Company
Option immediately prior to the Effective Time multiplied by the Exchange
Ratio, rounded down to the nearest whole number of Parent Ordinary Shares
and (ii) the per share exercise price for the Parent Ordinary Shares
issuable upon exercise of such assumed Company Option will be equal to the
quotient determined by dividing the exercise price per share of Company
Common Stock at which such Company Option was exercisable immediately prior
to the Effective Time by the Exchange Ratio, rounded up to the nearest
whole cent. Parent shall comply with the terms of all such Company Options
and use its best efforts to ensure, to the extent required by and subject
to the provisions of, the Company Equity Plan, and to the extent permitted
under the Code, that any Company Options that qualified for tax treatment
as incentive stock options under Section 422 of the Code prior to the
Effective Time continue to so qualify after the Effective Time. The Company
will take all necessary or appropriate actions to effectuate the treatment
of Company Options contemplated by this Section 4.9(a) and Parent shall
take all corporate actions necessary to reserve for issuance a sufficient
number of Parent Ordinary Shares for delivery upon exercise of assumed
Company Options on the terms set forth in this Section 4.9(a). Parent shall
file a Form S-8 registration statement with the SEC covering the Parent
Ordinary Shares issuable with respect to assumed Company Options within 10
business days after the Effective Time. Parent shall use commercially
reasonable efforts to maintain the effectiveness of such registration
statement or registration statements for so long as such assumed Company
Options remain outstanding.
(B) COMPANY WARRANTS. At the Effective Time, each outstanding Company
Warrant shall be assumed by Parent. Each Company Warrant so assumed by
Parent under this Agreement will continue to have, and be subject to, the
same terms and conditions of such Company Warrant immediately prior to the
Effective Time, except that (i) each Company Warrant will be exercisable
(or will become exercisable in accordance with its terms) for that number
of Parent Ordinary Shares equal to the product of the number of shares of
Company Common Stock that were issuable upon exercise of such Company
Warrant immediately prior to the Effective Time multiplied by the Exchange
Ratio, and (ii) the per share exercise price for the Parent Ordinary Shares
issuable upon exercise of such assumed Company Warrant will be equal to the
quotient determined by dividing the exercise price per share of Company
Common Stock at which such Company Warrant was exercisable immediately
prior to the Effective Time by the Exchange Ratio. Parent shall comply with
the terms of all such Company Warrants. Parent shall take all corporate
actions necessary to reserve for issuance a sufficient number of Parent
Ordinary Shares for delivery upon exercise of assumed Company Warrants on
the terms set forth in this Section 4.9(b).
(C) EMPLOYEE BENEFITS.
(I) Parent agrees that, subject to any necessary transition
period and subject to any applicable plan provision, contractual
requirements or Legal Requirements, all employees of the Company and
its Subsidiaries who continue employment with Parent, the Surviving
Corporation or any Subsidiary of Parent after the Effective Time
("CONTINUING EMPLOYEES") shall, following the Effective Time, be
eligible to participate in Parent's applicable employee benefit plans
(including equity plans, profit sharing plans, severance plans and
health and welfare benefit plans) to substantially the same extent as
similarly situated employees of Parent (based, among other things, on
location, responsibility, rank, seniority and job description). From
and after the Effective Time and continuing until not earlier than
December 31, 2008, Parent shall ensure that the Surviving Corporation
continues to provide Continuing Employees with the same benefits that
are provided by the Company as of immediately prior to the Effective
Time.
(II) For the sole purpose of determining a Continuing Employee's
eligibility to participate in such plans (but not for purposes of
benefit accrual), such Continuing Employee shall receive credit under
such plans for his or her years of continuous service with the Company
or its Subsidiaries prior to the Effective Time, provided that such
crediting of service shall not result in the duplication of benefits.
With respect to any welfare benefit plans maintained by Parent or its
Subsidiaries for the benefit of Continuing Employees located in the
United States, Parent shall, subject to any necessary transition
period and subject to any Legal Requirements: (A) cause to be waived,
as required by applicable Legal Requirements, any eligibility
requirements or pre-existing condition limitations; and (B) give
effect, in determining any deductible maximum out of pocket
limitations, to amounts paid by such Continuing Employees with respect
to substantially similar plans maintained by any of the Company or its
Subsidiaries during the plan year in which the Effective Time occurs.
(III) The Surviving Corporation shall, and Parent shall not take
any action that would cause the Surviving Corporation not to, honor in
accordance with their terms all deferred compensation plans,
agreements and arrangements, severance and separation pay plans,
agreements and arrangements, and all written employment, severance,
retention, incentive, change in control and termination agreements
(including any change in control provisions therein) applicable to
employees of the Company and its Subsidiaries. Part 4.9(c)(iii) of the
Company Disclosure Schedule accurately lists all such plans,
agreements and arrangements.
(IV) Nothing in this Section 4.9 or elsewhere in this Agreement
shall be construed to create a right of any employee of the Company or
a Subsidiary of the Company to employment with Parent, the Surviving
Corporation or any other Subsidiary of Parent. Except for Indemnified
Parties (as defined in Section 4.10(d)) to the extent of their
respective rights pursuant to Section 4.10, no employee of the Company
or a Subsidiary of the Company, no Continuing Employee and no other
Person, shall be deemed to be a third party beneficiary of this
Agreement. Nothing in this Section 4.9 or elsewhere in this Agreement
shall be construed to amend any benefit plan.
(V) To the extent any employee notification or consultation
requirements are imposed by applicable Legal Requirements with respect
to the transactions contemplated by this Agreement, the Company shall
cooperate with Parent to comply with such requirements prior to the
Effective Time.
4.10 INDEMNIFICATION; DIRECTORS' AND OFFICERS' INSURANCE.
(A) All rights to indemnification by the Company or any Subsidiaries
of the Company and exculpation existing in favor of Indemnified Parties for
their acts and omissions as directors and/or officers of the Company or any
Subsidiary of the Company occurring at or prior to the Effective Time
pursuant to those indemnification agreements listed on Part 4.10 of the
Company Disclosure Schedule and the Organizational Documents of the Company
or any Subsidiary of the Company (as applicable) as in effect on the date
of this Agreement (the "INDEMNIFICATION DOCUMENTS"), shall survive the
Merger and be observed by the Surviving Corporation to the fullest extent
available under the Indemnification Documents and applicable law for a
period of six years from the Effective Time, and Parent shall, and shall
cause the Surviving Corporation and its Subsidiaries to (i) fulfill and
honor in all respects the provisions of this Section 4.10(a) and (ii) not
amend, repeal or otherwise modify (or permit the Surviving Corporation to
amend, repeal or otherwise modify) the Organizational Documents of the
Surviving Corporation or any of its Subsidiaries in any manner that could
adversely affect the rights thereunder of any Indemnified Party.
(B) From the Effective Time through the sixth anniversary of the
Effective Time, Parent shall, and shall cause the Surviving Corporation to,
cause to be maintained in effect, for the benefit of the Indemnified
Parties, the current level and scope of directors' and officers' liability
insurance coverage as set forth in the Company's current directors' and
officers' liability insurance policies in effect as of the date of this
Agreement as disclosed on Part 4.10(b) of the Company Disclosure Schedule;
PROVIDED, HOWEVER, that (i) in no event shall Parent or the Surviving
Corporation be required pursuant to this Section 4.10(b) to expend in any
one year an amount in excess of 200% of the annual premium currently
payable by the Company with respect to such insurance coverage (which
current annual premium the Company represents and warrants to be $400,098
in the aggregate), it being understood that if the annual premiums payable
for such insurance coverage exceed such amount, the Surviving Corporation
shall be obligated to obtain a policy with the greatest coverage available
for a cost equal to such amount, and (ii) in lieu of the foregoing, and
notwithstanding anything to the contrary contained in clause "(i)" above,
the Company may obtain a prepaid tail policy (the "TAIL POLICY") prior to
the Effective Time for an aggregate price not to exceed six times the
premium currently payable by the Company, which policy provides Indemnified
Persons with directors' and officers' liability insurance for a period
ending no earlier than the sixth anniversary of the Effective Time.
(C) This Section 4.10 shall survive consummation of the Merger and the
Effective Time. This Section 4.10 is intended to benefit, and may be
enforced by, the Indemnified Parties and their respective heirs,
representatives, successors and assigns, and shall be binding on all
successors and assigns of Parent and the Surviving Corporation. In the
event of any merger, consolidation or other similar transaction involving
Parent or the Surviving Corporation, or in the event of any sale by Parent
or the Surviving Corporation of all or substantially all of its assets,
Parent shall make proper provision so that the continuing or surviving
corporation or entity shall assume the obligations set forth in this
Section 4.10.
(D) For purposes of this Agreement, each individual who is or was an
officer or director of the Company or any of its Subsidiaries any time
between February 16, 2007 and the Effective Time shall be deemed to be an
"INDEMNIFIED PARTY."
4.11 TAX OPINIONS. The Company, Parent and Merger Sub shall cooperate and
use commercially reasonable efforts in order for Company to obtain the opinion
of Cooley Godward Kronish LLP described in Section 5.2(e)(i) and in order for
Parent to obtain the opinion of O'Melveny & Myers LLP described in Section
5.3(e)(i). In connection therewith, the Company, Parent and Merger Sub shall, as
of the Effective Time, execute and deliver to Cooley Godward Kronish LLP and to
O'Melveny & Myers LLP tax representation letters substantially in the forms
attached as Exhibit C (for the Company) and Exhibit D (for Parent and Merger
Sub). The Company, Parent and Merger Sub shall use all commercially reasonable
efforts to cause the Merger to qualify as a reorganization under Section 368(a)
of the Code and a transaction that is not subject to Section 367(a)(1) of the
Code and shall not take any actions that to their knowledge could reasonably be
expected to prevent the Merger from qualifying as a reorganization under Section
368(a) of the Code and a transaction that is not subject to Section 367(a)(1) of
the Code. The Company, Parent and Merger Sub shall report the Merger as a
reorganization within the meaning of Section 368(a) of the Code and a
transaction that is not subject to Section 367(a)(1) of the Code, unless
otherwise required pursuant to a "determination" within the meaning of Section
1313(a) of the Code.
4.12 LISTING. Parent shall use its commercially reasonable efforts to cause
the Parent Ordinary Shares being issued in the Merger to be approved for listing
(subject to notice of issuance) on the Nasdaq Global Market, including by giving
notice to the Nasdaq Global Market on a Notification Form: Listing of Additional
Shares.
4.13 SUPPLEMENTAL INDENTURE. Prior to the Effective Time, Parent and the
Company shall execute a supplemental indenture (the "SUPPLEMENTAL INDENTURE")
pursuant to Section 10.12 of the Indenture, in form satisfactory to the Trustee
providing that each holder of Convertible Notes then outstanding shall have the
right from and after the Effective Time, during the period that such Convertible
Notes are convertible under the Supplemental Indenture, to convert such
Convertible Notes into the number of Parent Ordinary Shares receivable by a
holder, immediately prior to the Effective Time, of the number of shares of
Company Common Stock into which such Convertible Notes was convertible
immediately prior to the Effective Time.
4.14 TAX MATTERS.
(A) Following the Merger, Parent shall cause the Surviving Corporation
to timely comply with the reporting requirements of Treas. Reg. Sections
1.367-3(c)(6) and 1.368-3, to the extent required by applicable law, with
respect to the transactions contemplated hereby.
(B) Following the Merger, Parent shall timely provide notice to each
former holder of Company Common Stock that notifies Parent that such holder
has entered into a gain recognition agreement with the Internal Revenue
Service (pursuant to Treas. Reg. Section 1.367-8T) in connection with the
Merger, of either (i) a disposition by Parent or its Affiliates of all or a
portion of the Company Common Stock received by Parent in the Merger, or
(ii) a disposition of 90 percent of the gross assets or 70 percent of the
net assets of the Company (or those assets essential to the conduct of the
Company's business). In addition, upon written request from such holder
after receipt of notification from Parent, Parent shall use commercially
reasonable efforts to provide such information requested by the former
holder to determine if such holder must recognize gain due to any
disposition described in this Section 4.14(b). Parent shall have no
obligation to provide any notice or other information to the holder
pursuant to this Section 4.14(b) after October 15, 2014 or, if earlier,
October 15th of the year following the year in which the holder's gain
recognition agreement terminates.
SECTION 5. CONDITIONS TO THE MERGER
5.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The
respective obligations of each party hereto to effect the Merger shall be
subject to the satisfaction (or waiver by Parent and the Company, if permissible
under applicable Legal Requirements) on or prior to the Closing Date of the
following conditions:
(A) STOCKHOLDER APPROVAL. This Agreement shall have been adopted by
the requisite vote of holders of the Company Common Stock in accordance
with applicable Legal Requirements and the Company's Organizational
Documents;
(B) EFFECTIVENESS OF REGISTRATION STATEMENT. The Registration
Statement shall have become effective in accordance with the provisions of
the Securities Act, and no stop order shall have been issued and still be
pending, and no proceeding for that purpose shall have been initiated or be
threatened and be pending, by the SEC with respect to the Registration
Statement or the Proxy Statement/Prospectus;
(C) OTHER GOVERNMENTAL APPROVALS. if during the period of 60 days
after the date of this Agreement, both of the following occur: (x) either
the Committee on Foreign Investment in the United States (including any of
its respective members individually) ("CFIUS") or the President of the
United States takes any action, including communicating concerns to the
parties hereto about the Merger or initiating a review under Section 721 of
the Defense Production Act of 1950 (50 USC App. 2170)("SECTION 721"), and
(y) in response to any such action, Parent makes an appropriate filing
providing notice of the transactions that are the subject of this Agreement
to CFIUS pursuant to Section 721 (and, in the event Parent elects to make
any such filing, the Company and Parent will use commercially reasonable
efforts to prepare such filing, including providing the other party with
all information reasonably requested by the other party in connection
therewith), then either (A) the period of time for any applicable review
process by CFIUS pursuant to Section 721, shall have expired, and the
President of the United States shall not have taken action to block or
prevent the consummation of the transactions contemplated hereby on the
basis that they threaten to impair the national security of the United
States or (B) the Department of Treasury shall have provided notice to the
parties to the effect that action under Section 721 is concluded; and
(D) NO INJUNCTIONS; LAWS. No injunction shall have been issued by a
court of competent jurisdiction and shall be continuing that prohibits the
consummation of the Merger, and no law shall have been enacted since the
date of this Agreement and shall remain in effect that prohibits the
consummation of the Merger; PROVIDED, HOWEVER, that (i) prior to invoking
this provision, each party shall use commercially reasonable efforts to
have any such injunction lifted, and (ii) a party may not invoke this
provision unless the violation of such injunction or law that would arise
from the consummation of the Merger would have material negative
consequences for Parent or the Company or any of their respective
directors, officers or employees (it being clarified that for the purposes
of this Section 5.1(d) that: (x) an injunction issued by a court in Israel
or the United States that prohibits the consummation of the Merger; or (y)
a law enacted in Israel or the United States that prohibits the
consummation of the Merger, shall be deemed to have material negative
consequences for Parent or the Company).
5.2 CONDITIONS TO OBLIGATIONS OF PARENT AND MERGER SUB. The obligations of
Parent and Merger Sub to effect the Merger are further subject to the
satisfaction (or waiver by Parent, if permissible under applicable Legal
Requirements) on or prior to the Closing Date of the following conditions:
(A) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of the Company contained in Section 2 of this Agreement shall be accurate
in all respects as of the Closing Date with the same force and effect as if
made on the Closing Date, other than the representations and warranties in
Sections 2.3(a), 2.3(e), 2.20(b) and 2.24 (the "COMPANY EXCLUDED
REPRESENTATIONS"), which shall be accurate in all material respects as of
the Closing Date (except, in each case, to the extent any such
representation or warranty speaks as of the date of this Agreement or any
other specific date, in which case such representation or warranty (i) if
other than a Company Excluded Representation, shall have been accurate in
all respects as of such date, or (ii) if a Company Excluded Representation,
shall have been accurate in all material respects as of such date), except
that any inaccuracies in such representations and warranties (other than
the Company Excluded Representations) will be disregarded for purposes of
this Section 5.2(a) if such inaccuracies (considered collectively) do not
have a Material Adverse Effect on the Company as of the Closing Date (it
being understood that, for purposes of determining the accuracy of such
representations and warranties, (i) all "Material Adverse Effect"
qualifications and other qualifications based on the phrase "in all
material respects" or similar qualifications contained in such
representations and warranties shall be disregarded and (ii) any update of
or modification to the Company Disclosure Schedule made or purported to
have been made after the execution of this Agreement shall be disregarded);
(B) PERFORMANCE OF OBLIGATIONS OF THE COMPANY. The Company shall have
performed or complied with in all material respects all covenants and
agreements required to be performed or complied with by it under this
Agreement on or prior to the Closing Date;
(C) NO MATERIAL ADVERSE EFFECT ON THE COMPANY. Since the date of this
Agreement, no event shall have occurred or circumstance shall exist that,
alone or in combination with any other events or circumstances since the
date of this Agreement, has had or resulted in and continues to have or
result in a Material Adverse Effect on the Company, or would reasonably be
expected to have or result in a Material Adverse Effect on the Company
following the Closing Date;
(D) NO LEGAL PROCEEDING. There shall not be pending before any court
of competent jurisdiction any Legal Proceeding commenced by a Governmental
Entity against the Company or Parent that seeks to prohibit the
consummation of the Merger and that (i) is likely to result in a judgment
adverse to Parent or the Company and (ii) would have a Material Adverse
Effect on the Company or a Material Adverse Effect on Parent; and
(E) DOCUMENTS. Parent shall have received the following agreements and
documents, each of which shall be in full force and effect:
(I) a written tax opinion of Cooley Godward Kronish LLP, in form
and substance reasonably acceptable to the Company, dated as of the
Closing Date and addressed to Parent, to the effect that the Merger
will qualify as a reorganization within the meaning of Section 368(a)
of the Code and a transaction that is not subject to Section 367(a)(1)
of the Code (it being understood that if Cooley Godward Kronish LLP
does not render such opinion or withdraws or modifies such opinion,
this condition shall nonetheless be satisfied if O'Melveny & Myers LLP
renders such opinion);
(II) a certificate executed on behalf of the Company by an
executive officer confirming that the conditions set forth in Sections
5.2(a), 5.2(b) and 5.2(c) have been duly satisfied; and
(III) (A) the Supplemental Indenture, executed and delivered on
behalf of the Company and the Trustee and (B) the officer's
certificate and opinion(s) of counsel delivered by the Company to the
Trustee in accordance with Sections 6.1(c) and 7.3 of the Indenture in
connection therewith.
5.3 CONDITIONS TO OBLIGATION OF THE COMPANY. The obligation of the Company
to effect the Merger is further subject to the satisfaction (or waiver by the
Company, if permissible under applicable Legal Requirements) on or prior to the
Closing Date of the following conditions:
(A) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Parent and Merger Sub contained in Section 3 of this Agreement shall be
accurate in all respects as of the Closing Date with the same force and
effect as if made on the Closing Date, other than the representations and
warranties in Sections 3.3(a) and 3.3(d) (the "PARENT EXCLUDED
REPRESENTATIONS"), which shall be accurate in all material respects as of
the Closing Date (except, in each case, to the extent any such
representation or warranty speaks as of the date of this Agreement or any
other specific date, in which case such representation or warranty (i) if
other than a Parent Excluded Representation, shall have been accurate in
all respects as of such date, or (ii) if a Parent Excluded Representation,
shall have been accurate in all material respects as of such date), except
that any inaccuracies in such representations and warranties (other than
the Parent Excluded Representations) will be disregarded for purposes of
this Section 5.3(a) if such inaccuracies (considered collectively) do not
have a Material Adverse Effect on Parent as of the Closing Date (it being
understood that, for purposes of determining the accuracy of such
representations and warranties, (i) all "Material Adverse Effect"
qualifications and other qualifications based on the phrase "in all
material respects" or similar qualifications contained in such
representations and warranties shall be disregarded and (ii) any update of
or modification to the Parent Disclosure Schedule made or purported to have
been made after the execution of this Agreement shall be disregarded);
(B) PERFORMANCE OF OBLIGATIONS OF PARENT AND MERGER SUB. Parent and
Merger Sub shall have performed or complied with in all material respects
all covenants and agreements required to be performed or complied with by
them under this Agreement at or prior to the Closing Date;
(C) NO MATERIAL ADVERSE EFFECT ON PARENT. Since the date of this
Agreement, no event shall have occurred or circumstance shall exist that,
alone or in combination with any other events or circumstances since the
date of this Agreement, has had or resulted in and continues to have or
result in a Material Adverse Effect on Parent, or would reasonably be
expected to have or result in a Material Adverse Effect on Parent following
the Closing Date;
(D) NO LEGAL PROCEEDING. There shall not be pending before any court
of competent jurisdiction any Legal Proceeding commenced by a Governmental
Entity against the Company or Parent that seeks to prohibit the
consummation of the Merger and that (i) is likely to result in a judgment
adverse to Parent or the Company and (ii) would have a Material Adverse
Effect on Parent; and
(E) DOCUMENTS. The Company shall have received the following
agreements and documents, each of which shall be in full force and effect:
(I) a written tax opinion of O'Melveny & Myers LLP, in form and
substance reasonably acceptable to Parent, dated as of the Closing
Date and addressed to Parent, to the effect that the Merger will
qualify as a reorganization within the meaning of Section 368(a) of
the Code and a transaction that is not subject to Section 367(a)(1) of
the Code (it being understood that if O'Melveny & Myers LLP does not
render such opinion or withdraws or modifies such opinion, this
condition shall nonetheless be satisfied if Cooley Godward Kronish LLP
renders such opinion);
(II) a certificate executed on behalf of Parent by an executive
officer confirming that the conditions set forth in Sections 5.3(a),
5.3(b) and 5.3(c) have been duly satisfied; and
(III) the Supplemental Indenture, executed and delivered on
behalf of Parent.
(F) LISTING. Parent shall have delivered timely notice to the Nasdaq
Global Market on a Notification Form: Listing of Additional Shares with
respect to the Parent Ordinary Shares being issued in the Merger.
5.4 FRUSTRATION OF CLOSING CONDITIONS. None of the Company, Parent or
Merger Sub may rely on the failure of any condition set forth in Section 5.1,
Section 5.2 or Section 5.3, as the case may be, to be satisfied if such failure
was caused by the failure of such party (or any Affiliate of such party) to
perform any of its obligations under this Agreement.
SECTION 6. TERMINATION
6.1 TERMINATION. This Agreement may be terminated and the Merger may be
abandoned (notwithstanding any adoption of this Agreement by the stockholders of
the Company):
(A) by mutual written consent of the Company and Parent at any time
prior to the Effective Time;
(B) by Parent or the Company at any time after 5:00 p.m. Pacific Time
on October 20, 2008 (the "FINAL TIME") if the Merger shall not have been
consummated at or before the Final Time (provided that the right to
terminate this Agreement pursuant to this Section 6.1(b) shall not be
available to any party where the failure of the Merger to have been
consummated at or before the Final Time was caused by the failure of such
party (or any Affiliate of such party) to fulfill any obligation under this
Agreement;
(C) by Parent or the Company at any time prior to the Effective Time
if (i) there shall be any Legal Requirement enacted after the date of this
Agreement and remaining in effect that prohibits the consummation of the
Merger, or any court of competent jurisdiction shall have issued a
permanent injunction prohibiting the consummation of the Merger and such
injunction shall have become final and non-appealable, and (ii) the
violation of such Legal Requirement or injunction that would arise from the
consummation of the Merger would have material negative consequences for
Parent or the Company or any of their respective directors, officers or
employees (it being clarified that for the purposes of this Section 6.1(c)
that: (x) an injunction issued by a court in Israel or the United States
that prohibits the consummation of the Merger; or (y) a Legal Requirement
enacted in Israel or the United States that prohibits the consummation of
the Merger, shall be deemed to have material negative consequences for
Parent or the Company); PROVIDED, HOWEVER, that a party shall not be
permitted to terminate this Agreement pursuant to this Section 6.1(c) if
the issuance of any such injunction is attributable to the failure of such
party (or any Affiliate of such party) to perform in any material respect
any covenant or other agreement in this Agreement required to be performed
by such party (or any Affiliate of such party) at or prior to the Effective
Time;
(D) by either the Company or Parent if the approval of the holders of
Company Common Stock shall not have been obtained at the Company
Stockholders Meeting or at any adjournment or postponement thereof;
PROVIDED, HOWEVER, that a party shall not be permitted to terminate this
Agreement pursuant to this Section 6.1(d) if the failure to obtain such
approval was caused by the failure of such party (or any Affiliate of such
party) to fulfill any obligation under this Agreement;
(E) by Parent at any time prior to adoption of this Agreement by the
holders of Company Common Stock at the Company Stockholders Meeting if a
Triggering Event shall have occurred;
(F) by Parent if (i) there is an Uncured Inaccuracy in any
representation or warranty of the Company contained in Section 2 such that
the condition set forth in Section 5.2(a) would not be satisfied, or any
covenant of the Company contained in this Agreement shall have been
breached such that the condition set forth in Section 5.2(b) would not be
satisfied, (ii) Parent shall have delivered to the Company written notice
of such Uncured Inaccuracy or breach, and (iii) to the extent the Uncured
Inaccuracy is curable by the Company, at least 30 days shall have elapsed
since the date of delivery of such written notice to the Company and such
Uncured Inaccuracy or breach shall not have been cured in all material
respects; or
(G) by the Company if (i) there is an Uncured Inaccuracy in any
representation or warranty of Parent or Merger Sub contained in Section 3
such that the condition set forth in Section 5.3(a) would not be satisfied,
or any covenant of Parent or Merger Sub contained in this Agreement shall
have been breached such that the condition set forth in Section 5.3(b)
would not be satisfied, (ii) the Company shall have delivered to Parent
written notice of such Uncured Inaccuracy or breach, and (iii) to the
extent the Uncured Inaccuracy is curable by Parent or Merger Sub (as
applicable), at least 30 days shall have elapsed since the date of delivery
of such written notice to Parent and such Uncured Inaccuracy or breach
shall not have been cured in all material respects;
PROVIDED, HOWEVER, that notwithstanding anything to the contrary contained in
this Section 6.1: (1) Parent shall not be permitted to terminate this Agreement
pursuant to Section 6.1(f) if (A) there shall be an Uncured Inaccuracy in any
representation or warranty of Parent or Merger Sub contained in Section 3 such
that the condition set forth in Section 5.3(a) would not be satisfied, or (B)
any covenant or other agreement of Parent or Merger Sub contained in this
Agreement shall not have been performed or complied with such that the condition
set forth in Section 5.3(b) would not be satisfied; and (2) the Company shall
not be permitted to terminate this Agreement pursuant to Section 6.1(g) if (x)
there shall be an Uncured Inaccuracy in any representation or warranty of the
Company contained in Section 2 such that the condition set forth in Section
5.2(a) would not be satisfied, or (y) any covenant or other agreement of the
Company contained in this Agreement shall not have been performed or complied
with such that the condition set forth in Section 5.2(b) would not be satisfied.
6.2 NOTICE OF TERMINATION; EFFECT OF TERMINATION. Any termination of this
Agreement under Section 6.1 will be effective immediately upon the delivery of
written notice thereof by the terminating party to the other parties hereto (or,
in the case of termination pursuant to Section 6.1(f) or Section 6.1(g), on the
date specified therein). In the event of the termination of this Agreement as
provided in Section 6.1, this Agreement shall be of no further force or effect;
PROVIDED, HOWEVER, that: (a) this Section 6.2, Section 6.3 and Section 7 shall
survive the termination of this Agreement and shall remain in full force and
effect; (b) the termination of this Agreement shall not relieve any party from
any liability for any breach of any covenant or agreement contained in this
Agreement; and (c) the Confidentiality Agreement shall remain in full force and
effect in accordance with its terms.
6.3 FEES AND EXPENSES; TERMINATION FEE.
(A) GENERAL. Except as set forth in this Section 6.3, all fees and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such fees and
expenses whether or not the Merger is consummated.
(B) COMPANY PAYMENTS.
(I) If (A) (i) this Agreement is validly terminated by Parent or
the Company pursuant to Section 6.1(b) or Section 6.1(d), (ii) at or
prior to the time of such termination of this Agreement an Alternative
Acquisition Proposal shall have been publicly disclosed (and such
Alternative Acquisition Proposal shall not have been unconditionally
and publicly withdrawn prior to the date of the Company Stockholders
Meeting), (iii) in the case of a termination of this Agreement by
Parent pursuant to Section 6.1(b), Parent demonstrates that it would
reasonably have been expected that the Merger would have been
consummated prior to the termination of this Agreement but for the
making or pendency of such Alternative Acquisition Proposal (it being
clarified that this Section 6.3(b)(A)(iii) shall not apply to
termination of this Agreement by the Company), and (iv) within twelve
months after the date of termination of this Agreement, a Company
Acquisition (as defined below) is consummated or the Company enters
into a definitive agreement or binding letter of intent providing for
a Company Acquisition (which is subsequently consummated), or (B) this
Agreement is validly terminated by Parent pursuant to Section 6.1(e),
then (x) if termination of this Agreement is pursuant to Section
6.1(b) or Section 6.1(d), within one (1) business day after
consummation of the Company Acquisition described above, or (y) if
termination of this Agreement is pursuant to Section 6.1(e), within
one (1) business day after the termination of this Agreement, the
Company shall cause to be paid to Parent, in cash in immediately
available funds, a non-refundable termination fee in the amount of
$1.2 million. In addition, in any of the foregoing circumstances where
the Company is obligated to pay a termination fee, the Company shall
also reimburse Parent for Parent's reasonable and documented
out-of-pocket expenses incurred in connection with this Agreement and
the transactions contemplated thereby, not to exceed $1 million, less
any amounts previously paid by the Company on account of such expenses
as provided in the last sentence of this paragraph (the "PARENT
EXPENSES"), within five (5) business days after the Company's receipt
of reasonable documentation of such expenses. In the event that (1)
this Agreement is validly terminated by Parent or the Company pursuant
to Section 6.1(d), and (2) all of the conditions to the Company's
obligation to consummate the Merger set forth in Sections 5.1 and 5.3
(other than the conditions set forth in Sections 5.1(a), (b) and (c)
and Sections 5.3(e) and 5.3(f)) were satisfied as of the time of such
termination, then the Company shall reimburse Parent for Parent's
reasonable and documented out-of-pocket expenses incurred in
connection with this Agreement and the transactions contemplated
thereby, not to exceed $500,000, less any amounts previously paid by
the Company on account of such expenses, within five (5) business days
after the Company's receipt of reasonable documentation of such
expenses.
(II) The Company acknowledges that the agreements contained in
this Section 6.3(b) are an integral part of the transactions
contemplated by this Agreement, and that, without these agreements,
Parent would not enter into this Agreement; accordingly, if the
Company fails promptly to pay when due any amount payable by the
Company under this Section 6.3, then: (A) the Company shall reimburse
Parent for all costs and expenses (including fees and disbursements of
counsel) incurred in connection with the collection of such overdue
amount and the enforcement by Parent of its rights under this Section
6.3; and (B) the Company shall pay to Parent interest on such overdue
amount (for the period commencing as of the date such overdue amount
was originally required to be paid through the date such overdue
amount is actually paid to Parent in full) at a rate per annum equal
to five percent (5%). Payment of the fees described in this Section
6.3(b) shall not be in lieu of damages incurred in the event of
willful breach of this Agreement.
(III) For the purposes of this Agreement, "COMPANY ACQUISITION"
shall mean any of the following transactions (other than the
transactions contemplated by this Agreement and other than any
transactions in which the Company is acquired by Parent or any of its
affiliates): (A) a merger, consolidation, business combination,
recapitalization or similar transaction involving the Company pursuant
to which the stockholders of the Company immediately preceding such
transaction do not hold (directly or indirectly) at least 50% of the
aggregate equity interests in the surviving or resulting entity of
such transaction or a parent entity following such transaction; (B) a
transaction that involves, directly or indirectly, a sale or other
disposition by the Company of assets that represent in excess of 50%
of the consolidated assets of the Company and its Subsidiaries or a
business or businesses that constitute or account for at least 50% of
the consolidated net revenues of the Company and its Subsidiaries,
taken as a whole, immediately prior to such sale; or (C) the
acquisition by any Person or "group" (as defined in the Exchange Act
and the rules promulgated thereunder) (including by way of a tender
offer or an exchange offer or issuance by the Company), directly or
indirectly, of beneficial ownership of shares representing in excess
of 50% of the voting power of the then outstanding shares of capital
stock of the Company.
SECTION 7. MISCELLANEOUS PROVISIONS
7.1 AMENDMENT. This Agreement may be amended with the approval of the
Company and Parent at any time prior to the Effective Time; PROVIDED, HOWEVER,
that after any adoption of this Agreement by the Company's stockholders, no
amendment shall be made which by law requires further approval of the
stockholders of the Company without the further approval of such stockholders.
This Agreement may not be amended except by an instrument in writing signed on
behalf of each of the parties hereto.
7.2 WAIVER.
(A) No failure on the part of any party to exercise any power, right,
privilege or remedy under this Agreement, and no delay on the part of any
party in exercising any power, right, privilege or remedy under this
Agreement, shall operate as a waiver of such power, right, privilege or
remedy; and no single or partial exercise of any such power, right,
privilege or remedy shall preclude any other or further exercise thereof or
of any other power, right, privilege or remedy.
(B) No party shall be deemed to have waived any claim arising out of
this Agreement, or any power, right, privilege or remedy under this
Agreement, unless the waiver of such claim, power, right, privilege or
remedy is expressly set forth in a written instrument duly executed and
delivered on behalf of such party; and any such waiver shall not be
applicable or have any effect except in the specific instance in which it
is given.
7.3 NO SURVIVAL OF REPRESENTATIONS AND WARRANTIES. None of the
representations and warranties of the Company contained in this Agreement, or
contained in any certificate delivered pursuant to this Agreement or in
connection with any of the transactions contemplated by this Agreement, shall
survive the Effective Time.
7.4 ENTIRE AGREEMENT; COUNTERPARTS. This Agreement, the other agreements
referred to herein and the Confidentiality Agreement constitute the entire
agreement and supersede all prior agreements and understandings, both written
and oral, among or between any of the parties with respect to the subject matter
hereof and thereof. Without limiting the generality of the foregoing: (a) Parent
and Merger Sub acknowledge that the Company has not made and is not making any
representations or warranties whatsoever regarding the subject matter of this
Agreement, express or implied, except as provided in Section 2, and that they
are not relying and have not relied on any representations or warranties
whatsoever regarding the subject matter of this Agreement, express or implied,
except as provided in Section 2; and (b) the Company acknowledges that Parent
and Merger Sub have not made and are not making any representations or
warranties whatsoever regarding the subject matter of this Agreement, express or
implied, except as provided in Section 3, and that it is not relying and has not
relied on any representations or warranties whatsoever regarding the subject
matter of this Agreement, express or implied, except as provided in Section 2.
This Agreement may be executed in several counterparts, each of which shall be
deemed an original and all of which shall constitute one and the same
instrument.
7.5 APPLICABLE LAW; JURISDICTION. This agreement is made under, and shall
be construed and enforced in accordance with, the laws of the State of Delaware
applicable to agreements made and to be performed solely therein, without giving
effect to principles of conflicts of law. In any action among or between any of
the parties arising out of or relating to this Agreement, each of the parties
irrevocably and unconditionally consents and submits to the exclusive
jurisdiction and venue of the Court of Chancery of the State of Delaware and
unconditionally consents to service of process in any such action by notice in
accordance with Section 7.8.
7.6 ATTORNEYS' FEES. In any action at law or suit in equity to enforce this
Agreement or the rights of any of the parties hereunder, the prevailing party in
such action or suit shall be entitled to receive a reasonable sum for its
attorneys' fees and all other reasonable costs and expenses incurred in such
action or suit.
7.7 ASSIGNABILITY. This Agreement shall be binding upon, and shall be
enforceable by and inure to the benefit of, the parties hereto and their
respective successors and assigns. This Agreement shall not be assignable by any
party without the express written consent of the other parties hereto. Except as
set forth in Section 4.10 with respect to the Indemnified Parties, nothing in
this Agreement, express or implied, is intended to or shall confer upon any
Person, other than the parties hereto, any right, benefit or remedy of any
nature.
7.8 NOTICES. Any notice or other communication required or permitted to be
delivered to any party under this Agreement shall be in writing and shall be
deemed properly delivered, given and received when delivered (by hand, by
registered mail, by courier or express delivery service or by facsimile) to the
address or facsimile telephone number set forth beneath the name of such party
below (or to such other address or facsimile telephone number as such party
shall have specified in a written notice given to the other parties hereto):
IF TO PARENT OR MERGER SUB:
Tower Semiconductor Ltd.
Ramat Gavriel Industrial Area
P.O. Box 619
Migdal Haemek Israel 23105
Attention: Chief Financial Officer
Facsimile: + 972-(4)-604-7242
WITH A COPY TO (WHICH SHALL NOT CONSTITUTE NOTICE):
Yigal Arnon & Co.
1 Azrieli Center
Tel-Aviv 67021
Israel
Attn: David Schapiro
Facsimile: +972-(3)-608-7714
and an additional copy (which shall not constitute notice) to:
O'Melveny & Myers LLP
275 Battery Street, Suite 2600
San Francisco, CA 94111
Attn: Michael S. Dorf
Facsimile: +1-(415)-984-8701
IF TO THE COMPANY:
Jazz Technologies, Inc.
4321 Jamboree Road
Newport Beach, CA 92660
Attention: Chief Legal Officer
Facsimile: 949-315-3811
WITH A COPY TO (WHICH SHALL NOT CONSTITUTE NOTICE):
Cooley Godward Kronish LLP
101 California Street, 5th floor
San Francisco, CA 94111
Attention: Gian-Michele a Marca
Facsimile: (415) 693-2222
7.9 SEVERABILITY. Any term or provision of this Agreement that is invalid
or unenforceable in any situation in any jurisdiction shall not affect the
validity or enforceability of the remaining terms and provisions hereof or the
validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction. If the final judgment of a court of
competent jurisdiction declares that any term or provision hereof is invalid or
unenforceable, the parties hereto agree that the court making such determination
shall have the power to limit the term or provision, to delete specific words or
phrases, or to replace any invalid or unenforceable term or provision with a
term or provision that is valid and enforceable and that comes closest to
expressing the intention of the invalid or unenforceable term or provision, and
this Agreement shall be enforceable as so modified. In the event such court does
not exercise the power granted to it in the prior sentence, the parties hereto
agree to replace such invalid or unenforceable term or provision with a valid
and enforceable term or provision that will achieve, to the extent possible, the
economic, business and other purposes of such invalid or unenforceable term.
7.10 OBLIGATION OF PARENT. Parent shall ensure that each of Merger Sub and
the Surviving Corporation duly performs, satisfies and discharges on a timely
basis each of the covenants, obligations and liabilities of Merger Sub and the
Surviving Corporation under this Agreement.
7.11 SPECIFIC PERFORMANCE. Each of the parties hereto agrees that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that, in addition to any other
remedy that a party hereto may have under law or in equity, any party hereto
shall be entitled to seek injunctive relief to prevent any breach of this
Agreement and to enforce specifically the terms and provisions hereof.
7.12 CONSTRUCTION
(A) For purposes of this Agreement, whenever the context requires: the
singular number shall include the plural, and vice versa; the masculine
gender shall include the feminine and neuter genders; the feminine gender
shall include the masculine and neuter genders; and the neuter gender shall
include masculine and feminine genders.
(B) The parties hereto agree that any rule of construction to the
effect that ambiguities are to be resolved against the drafting party shall
not be applied in the construction or interpretation of this Agreement.
(C) As used in this Agreement, the words "include" and "including,"
and variations thereof, shall not be deemed to be terms of limitation, but
rather shall be deemed to be followed by the words "without limitation."
(D) Except as otherwise indicated, all references in this Agreement to
"Sections," "Exhibits" and "Schedules" are intended to refer to Sections of
this Agreement and Exhibits and Schedules to this Agreement.
(E) All references to a document or instrument having been made
available to Parent shall mean the making available of such document or
instrument to Parent and Parent's legal and financial advisors on the
Company's electronic data room no later than twenty-four (24) hours prior
to the date of this Agreement.
(F) All references in this Agreement to "$" are intended to refer to
U.S. dollars.
Parent, Merger Sub and the Company have caused this Agreement to be
executed as of the date first written above.
TOWER SEMICONDUCTOR LTD.
By: /s/ Russell C. Ellwanger
----------------------------
Russell C. Ellwanger
Chief Executive Officer
By: /s/ Oren Shirazi
----------------------------
Oren Shirazi
Acting Chief Financial Officer
ARMSTRONG ACQUISITION CORP.
By: /s/ Russell C. Ellwanger
----------------------------
Russell C. Ellwanger
Chief Executive Officer
JAZZ TECHNOLOGIES, INC.
By: /s/ Gilbert F. Amelio
----------------------------
Gilbert F. Amelio
Chairman and Chief Executive Officer
EXHIBITS
Exhibit A Certain Definitions
Exhibit B Form of Certificate of Incorporation of Surviving Corporation
Exhibit C Form of Tax Representation Letter (Company)
Exhibit D Form of Tax Representation Letter (Parent)
LIST OF OMITTED SCHEDULES
Company Disclosure
Schedule
Part 2.1(b) Subsidiaries
Part 2.3(c) Registration Rights
Part 2.3(d) Company Options and Restricted Shares outstanding under
Company Equity Plan as of May 5, 2008
Part 2.4 Listing and other rules and regulations of AMEX
Part 2.5 Absence of Certain Changes
Part 2.6(a)(i) Registered IP
Part 2.6(a)(ii) Intellectual Property - Licensed in IP; Contracts
Part 2.6(a)(iii) Intellectual Property - Licensed Out IP
Part 2.6(a)(iv) Intellectual Property - Development Agreements
Part 2.6(b) Intellectual Property - Limitations on Use
Part 2.6(b)(v) No Funding, Facilities or Personnel of Government Entity or
Educational Institution
Part 2.6(b)(vii) Intellectual Property - Process Technologies
Part 2.6(e) Intellectual Property - Effect of Merger
Part 2.6(g) Intellectual Property - Infringement of Third Party IP
Part 2.6(h) Intellectual Property - Source Code
Part 2.6(k) Standards Bodies
Part 2.7(a) Leaseholds
Part 2.7(a) Assets - Encumbrances
Part 2.8(a) Material Contracts
Part 2.8(a) Material Contracts - Compliance
Part 2.8(b) Government Contracts
Part 2.9 Compliance with Legal Requirements
Part 2.10 Legal Proceedings
Part 2.11 Governmental Authorizations
Part 2.12(a) Tax Matters - Tax Returns
Part 2.12(d) Tax Matters - Claims or Proceedings
Part 2.12(g) Tax Incentives or Concessions
Part 2.12(h) Tax Matters - 280G Payments
Part 2.13(a) List of All Employee Benefit Plans and Programs
Part 2.13(c) Benefit Plans - Compliance
Part 2.13(d) Benefit Plans - Changes in Actuarial or Other Assumptions
Part 2.14(b) Employee and Labor Matters - Severance Benefits
Part 2.14(c) Employee and Labor Matters - Non-At Will Employees;
Severance; Termination Benefits
Part 2.14(f) Collective Bargaining Agreements
Part 2.14(g) Benefit Plans - Compliance
Part 2.14(h)
Part 2.14(i) Benefit Plans - Certain Plans
Part 2.14(j) Benefit Plans - Penalties and Assets
Part 2.14(k) Benefit Plans - Retiree Benefits
Part 2.14(l) Employee and Labor Matters; Benefit Plans - Legal Compliance
Part 2.14(m) Employee and Labor Matters - Long Term Leave
Part 2.15 Environmental Matters
Part 2.16(a) Insurance
Part 2.16(b) Pending Insurance Claims
Part 2.18 Product Warranties
Part 2.22 Non-Contravention; Consents
Part 2.27(c) Reduction in Volume of Business
Part 2.27(d) Accounts Receivable Aging as of May 13, 2008
Part 2.27(e) Accounts Payable Aging as of May 13, 2008
Part 4.1(b)(vii)
Part 4.1(b)(x) Employee Benefits Under Collective Bargaining Agreement
Part 4.1(b)(xi) Existing Bonus/Retention Commitments
Part 4.1(b)(xv) Changes to Accounting Practices
Part 4.9(c)(iii) Employee Severance and Other Plans
Part 4.10(a) Indemnification Obligations
Part 4.10(b) D&O Insurance
Parent Disclosure
Schedule
Part 3.1 Due Organization and Good Standing
Part 3.3 Capitalization, Etc.
Part 3.5 Absence of Certain Changes
Part 3.6 IP Rights
Part 3.7 Contracts
Part 3.8 Compliance with Legal Requirements
Part 3.9 Legal Proceedings; Orders
Part 3.10 Governmental Authorizations
Part 3.12 Transactions with Affiliates
Part 3.14 Non-Contravention; Consents
The above schedules have been omitted from this exhibit pursuant to Item
601(b)(2) of Regulation S-K. The Company undertakes to furnish supplemental
copies of any of the omitted schedules to the U.S. Securities and Exchange
Commission upon request.
EXHIBIT A
CERTAIN DEFINITIONS
For purposes of the Agreement (including this EXHIBIT A):
AFFILIATE. A Person shall be deemed to be an "AFFILIATE" of another Person
if such Person directly or indirectly controls, is directly or indirectly
controlled by or is directly or indirectly under common control with such other
Person.
ALTERNATIVE ACQUISITION INQUIRY. "ALTERNATIVE ACQUISITION INQUIRY" shall
mean any inquiry, indication of interest or request for non-public information
from a third party (other than an inquiry, indication of interest or request for
non-public information made or submitted by Parent or any of its affiliates)
that could reasonably be expected to lead to an Alternative Acquisition
Proposal.
ALTERNATIVE ACQUISITION PROPOSAL. "ALTERNATIVE ACQUISITION PROPOSAL" shall
mean any offer or proposal from a third party (other than an offer or proposal
made or submitted by Parent or any of its affiliates) contemplating any
Alternative Acquisition Transaction between such third party or any Affiliate of
such third party and the Company.
ALTERNATIVE ACQUISITION TRANSACTION. "ALTERNATIVE ACQUISITION TRANSACTION"
shall mean any transaction or series of related transactions (other than the
transactions contemplated by the Agreement and other than any transactions of
the type described below between the Company and Parent or any of its
affiliates) involving:
(A) any merger, exchange, consolidation, business combination, plan of
arrangement, issuance of securities, acquisition of securities,
reorganization, recapitalization, takeover offer, tender offer, exchange
offer or other similar transaction: (i) in which a Person or "group" (as
defined in the Exchange Act and the rules promulgated thereunder) directly
or indirectly would acquire, if consummated, beneficial or record ownership
of securities representing more than 15% of the outstanding securities of
the Company; (ii) in which the Company issues securities representing more
than 15% of the outstanding securities of the Company; or (iii) in which
the stockholders of the Company immediately preceding such transaction
hold, directly or indirectly, less than 85% of the equity interests in the
surviving or resulting entity of such transaction or in any parent entity
immediately following such transaction;
(B) any sale, lease, exchange, transfer, license or disposition of any
business or businesses or assets that constitute or account for 15% or more
of the Company and its Subsidiaries, taken as a whole; or
(C) any liquidation or dissolution of the Company or a Designated
Subsidiary.
AGREEMENT. "AGREEMENT" shall mean the Agreement and Plan of Merger and
Reorganization to which this EXHIBIT A is attached, together with this EXHIBIT
A, as such Agreement and Plan of Merger and Reorganization (including this
EXHIBIT A) may be amended from time to time.
CODE. "CODE" shall mean the Internal Revenue Code of 1986, as amended.
COMPANY COMMON STOCK. "COMPANY COMMON STOCK" shall mean the common stock,
$.0001 par value per share, of the Company.
COMPANY EQUITY PLAN. "COMPANY EQUITY PLAN" shall mean the Company's 2006
Equity Incentive Plan.
COMPANY OPTIONS. "COMPANY OPTIONS" shall mean options to purchase shares of
Company Common Stock from the Company, whether granted by the Company pursuant
to the Company Equity Plan or otherwise.
COMPANY OWNED IP. "COMPANY OWNED IP" shall mean all material (a) Company
Software, (b) Company Process Technology and (c) all other Intellectual Property
and Intellectual Property Rights, that in each case are related to the business
of the Company and its Subsidiaries and in which the Company has (or purports to
have) an ownership interest.
COMPANY PROCESS TECHNOLOGY. "COMPANY PROCESS TECHNOLOGY" shall mean any
Intellectual Property and Intellectual Property Rights (excluding trademark and
trade name rights and similar rights) that both (a) are owned(or which the
Company purports to be owned) by the Company or any of its Subsidiaries; and (b)
protect or apply to Process Technology.
COMPANY SOFTWARE. "COMPANY SOFTWARE" shall mean any software, including
software components of design kits used in connection with Company Process
Technology, software development tools and firmware and other software embedded
in hardware devices, and all updates, upgrades, releases, enhancements and bug
fixes, in each case owned (or which the Company purports to be owned) by the
Company or any of its Subsidiaries.
COMPANY WARRANTS. "COMPANY WARRANTS" shall mean the warrants to purchase
shares of Company Common Stock at an exercise price of $5.00 per share issued by
the Company in its initial public offering of units or in a private placement
consummated on March 13, 2006.
COMPANY UNITS. "COMPANY UNITS" consist of one (1) share of Company Common
Stock and two (2) Company Warrants.
CONFIDENTIALITY AGREEMENT. "CONFIDENTIALITY AGREEMENT" shall mean that
certain letter agreement, dated March 12, 2008, between Parent and the Company.
CONVERTIBLE NOTES. "CONVERTIBLE NOTES" shall mean the Company's 8%
convertible senior notes due 2011 issued pursuant to the Indenture.
DESIGNATED SUBSIDIARY. "DESIGNATED SUBSIDIARY" shall mean either of the
following Subsidiaries: Jazz Semiconductor, Inc., a Delaware corporation; and
Newport Fab, LLC, a Delaware limited liability company.
ENCUMBRANCE. "ENCUMBRANCE" shall mean any lien, pledge, hypothecation,
charge, mortgage, security interest, encumbrance, claim, option, right of first
refusal, preemptive right, community property interest or restriction of any
nature (including any restriction on the voting of any security, any restriction
on the transfer of any security or other asset, any restriction on the receipt
of any income derived from any asset, any restriction on the use of any asset
and any restriction on the possession, exercise or transfer of any other
attribute of ownership of any asset).
ENTITY. "ENTITY" shall mean any corporation (including any non-profit
corporation), general partnership, limited partnership, limited liability
partnership, joint venture, estate, trust, company (including any company
limited by shares, limited liability company or joint stock company), firm,
society or other enterprise, association, organization or entity (including any
Governmental Entity).
EXCHANGE ACT. "EXCHANGE ACT" shall mean the Securities Exchange Act of
1934, as amended.
FACILITIES. "FACILITIES" shall mean any real property or interest in real
property that is being used or has been used by the Company or any Designated
Subsidiary and all buildings, structures or other improvements thereon.
FACILITY AGREEMENT. "FACILITY AGREEMENT" means that certain Restated
Facility Agreement originally made on January 18, 2001 and restated on August
24, 2006 among Parent and Bank Hapoalim B.M. and Bank Leumi Le-Israel B.M.
GAAP. "GAAP" shall mean United States generally accepted accounting
principles.
GOVERNMENTAL AUTHORIZATION. "GOVERNMENTAL AUTHORIZATION" shall mean any
permit, license, registration, qualification or authorization granted by any
Governmental Entity.
GOVERNMENTAL ENTITY. "GOVERNMENTAL ENTITY" shall mean any federal, state,
local or foreign governmental authority.
GOVERNMENT CONTRACT. "GOVERNMENT CONTRACT" means any customer contract
(including any basic ordering agreement, letter contract, purchase order,
delivery order, task order or change order and including any "contractor team
arrangement" as defined in Federal Acquisition Regulation 9.601) between, (A)
the Company or any Subsidiary of the Company and an United States Governmental
Entity or (B) the Company or any Subsidiary of the Company as a subcontractor at
any tier and prime contractor to an United States Governmental Entity.
INDENTURE. "INDENTURE" shall mean that certain Indenture, dated as of
December 19, 2006, between the Company and U.S. Bank National Association, as
supplemented, amended or otherwise modified from time to time.
INTELLECTUAL PROPERTY. "INTELLECTUAL PROPERTY" shall mean algorithms, APIs,
apparatus, databases, data collections, development tools, diagrams, formulae,
inventions (whether or not patentable), know-how, logos, marks (including brand
names, product names, logos and slogans), mask works, methods, network
configurations and architectures, processes, proprietary information, protocols,
schematics, semiconductor devices, specifications, software, software code (in
any form, including source code and executable or object code), subroutines,
techniques, user interfaces, URLs, web sites, works of authorship and other
forms of technology (whether or not embodied in any tangible form such as
instruction manuals, laboratory notebooks, prototypes, samples, studies and
summaries).
INTELLECTUAL PROPERTY RIGHTS. "INTELLECTUAL PROPERTY RIGHTS" shall mean all
rights of the following types, which may exist or be created under the laws of
any jurisdiction in the world: (a) rights associated with works of authorship,
including exclusive exploitation rights, copyrights, moral rights and mask
works; (b) trademark and trade name rights and similar rights; (c) trade secret
rights; (d) patent and industrial property rights; (e) other proprietary rights
in Intellectual Property; and (f) rights in or relating to registrations,
renewals, extensions, combinations, divisions and reissues of, and applications
for, any of the rights referred to in clauses "(a)" through "(e)" above.
KNOWLEDGE. "KNOWLEDGE" shall mean, if in reference to an individual, the
knowledge of such person, and if in reference to an entity, the knowledge of
such entity's directors or executive officers and, in the case of the Company,
the knowledge of Gilbert F. Amelio, Paul A. Pittman, Allen R. Grogan, Chuck Fox,
Marco Racanelli, Nabil Al Ali, Dan Lynch, Luca Fabbri, Andy Chan and Susanna
Bennett.
LEGAL PROCEEDING. "LEGAL PROCEEDING" shall mean any lawsuit, court action
or other court proceeding.
LEGAL REQUIREMENT. "LEGAL REQUIREMENT" shall mean any law, rule or
regulation adopted or promulgated by any Governmental Entity, including any
instrument or grant from any Governmental Entity.
MATERIAL ADVERSE EFFECT. "MATERIAL ADVERSE EFFECT" shall mean, with respect
to the Company or Parent (as the case may be), (i) a material adverse effect on
the business, assets, operations or condition (financial or otherwise) of such
party and its Subsidiaries, taken as a whole or (ii) an effect that would
prevent the Company or Parent (as the case may be) from consummating the
transactions contemplated by the Agreement at or prior to the Final Time;
PROVIDED, HOWEVER, that none of the following shall be deemed either alone or in
combination to constitute, and none of the following shall be taken into account
in determining whether there has been or would be, a Material Adverse Effect on
a party: (A) any adverse effect that results directly or indirectly from general
economic, business, financial or market conditions (except to the extent that
such party is adversely affected disproportionately relative to other companies
operating in the same industries as such party); (B) any adverse effect arising
directly or indirectly from or otherwise relating to any of the industries or
industry sectors in which such party or any of its Subsidiaries operates (except
to the extent that such party is adversely affected disproportionately relative
to other companies operating in the same industries as such party); (C) any
adverse effect arising directly or indirectly from or otherwise relating to
fluctuations in the value of any currency; (D) any adverse effect arising
directly or indirectly from or otherwise relating to any act of terrorism, war,
national or international calamity or any other similar event; (E) any adverse
effect arising directly or indirectly from or otherwise relating to the
announcement or pendency of the Agreement or the Merger, including any
cancellations of or delays in customer orders, any reduction in sales, any
disruption in (or loss of) supplier, distributor, partner or similar
relationships or any loss of employees, or any claims made or any litigation
filed by stockholders of the Company that challenges the Merger; (F) the failure
of such party to meet internal or analysts' expectations or projections or a
decline in such party's stock price, in and of itself (for the avoidance of
doubt, this clause "(F)" shall not preclude the other party from asserting that
the underlying cause of any such failure or decrease in stock price is a
Material Adverse Effect); (G) any adverse effect arising directly or indirectly
from or otherwise relating to any action taken by such party or any of its
Subsidiaries with the other party's consent or in compliance by such party with
the terms of the Agreement; (H) any adverse effect arising directly from any
change in, or any compliance with or action taking for the purpose of complying
with, any Legal Requirement; and (I) any adverse effect arising directly or
indirectly from or otherwise relating to any request or requirement by any
Governmental Entity that any party to the Agreement or any of the Subsidiaries
of any party to the Agreement enter into any voting trust arrangement, proxy
arrangement, "hold separate" agreement or similar agreement or arrangement with
respect to any assets or operations of such party or Subsidiary or any
securities of any Subsidiary of the Company.
OPEN SOURCE LICENSE. "OPEN SOURCE LICENSE" means any license that has been
designated as an approved "open source license" on www.opensource.org (including
but not limited to the GNU General Public License (GPL), GNU Lesser General
Public License (LGPL), Mozilla Public License (MPL), BSD licenses, the Artistic
License, the Netscape Public License, the Sun Community Source License (SCSL),
the Sun Industry Standards Source License (SISSL) and the Apache License).
OPEN SOURCE SOFTWARE. "OPEN SOURCE SOFTWARE" shall mean any software that
is generally licensed or made available in source code form under the terms of a
license (such as the General Public License, the Lesser General Public License,
the Mozilla license, and the Apache license) that allows for the use,
modification, and redistribution of such software in source code form without
the payment of any license fees or royalties.
ORGANIZATIONAL DOCUMENTS. "ORGANIZATIONAL DOCUMENTS" shall mean, with
respect to any Entity, (a) if such Entity is a corporation, such Entity's
certificate or articles of incorporation and by-laws, as amended and in effect
on the date hereof, and (b) if such Entity is a limited liability company, such
Entity's certificate or articles of formation and operating agreement.
PARENT OWNED IP. "PARENT OWNED IP" shall mean all material Intellectual
Property and Intellectual Property Rights that are related to the business of
Parent and its Subsidiaries and in which Parent has an ownership interest.
PERMITTED ENCUMBRANCES. "PERMITTED ENCUMBRANCES" shall mean (a) liens for
taxes not yet due and payable, (b) liens, encumbrances or imperfections of title
that have arisen in the ordinary course of business, (c) liens, encumbrances or
imperfections of title resulting from or otherwise relating to any of the
contracts referred to in the Company Disclosure Schedule or Parent Disclosure
Schedule, as applicable, (d) liens, encumbrances or imperfections of title
relating to liabilities reflected in the financial statements (including any
related notes) contained in the Company SEC Documents or Parent Reports, as
applicable, (e) liens, pledges or encumbrances arising from or otherwise
relating to transfer restrictions under the Securities Act and the securities
laws of the various states of the United States or foreign jurisdictions, and
(f) liens, encumbrances or imperfections of title which would not materially
detract from the value of the applicable asset or place any material
restrictions on its intended use or enjoyment.
PERSON. "PERSON" shall mean any individual or Entity.
PROCESS TECHNOLOGY. "PROCESS TECHNOLOGY" shall mean (i) process steps used
in the fabrication of wafers, including process technologies for digital CMOS,
standard analog CMOS, advanced analog CMOS, RF CMOS, high-voltage CMOS, bipolar
CMOS, silicon-germanium bipolar CMOS, and bipolar CMOS double-diffused metal
oxide semiconductor; or (ii) any improvement to, or new design of, manufacturing
tools used to fabricate wafers; or (iii) any layout optimization carried out to
enhance yield and performance by design-for-manufacturing rules, optical
proximity correction, and other techniques.
PROXY STATEMENT/PROSPECTUS. "PROXY STATEMENT/PROSPECTUS" shall mean the
proxy statement to be sent to the Company's stockholders in connection with the
Company Stockholders' Meeting.
REGISTERED IP. "REGISTERED IP" shall mean all Intellectual Property Rights
that are registered, filed or issued under the authority of, with or by any
Governmental Entity, including all patents, registered copyrights, registered
mask works and registered trademarks and domain names and all applications for
any of the foregoing.
REGISTRATION STATEMENT. "REGISTRATION STATEMENT" shall mean the
registration statement on Form F-4 (or combination Form F-4/F-3) to be filed
with the SEC by Parent in connection with issuance of Parent Ordinary Shares in
the Merger and upon conversion of the Convertible Notes, as said registration
statement may be amended prior to the time it is declared effective by the SEC.
SEC. "SEC" shall mean the United States Securities and Exchange Commission.
SECURITIES ACT. "SECURITIES ACT" shall mean the Securities Act of 1933, as
amended.
SUBSIDIARY. An Entity shall be deemed to be a "SUBSIDIARY" of another
Person if such Person directly or indirectly owns, beneficially or of record,
(a) an amount of voting securities or other interests in such Entity that is
sufficient to enable such Person to elect at least a majority of the members of
such Entity's board of directors or comparable governing body, or (b) at least
50% of the outstanding equity interests issued by such Entity.
SUPERIOR PROPOSAL. "SUPERIOR PROPOSAL" shall mean any bona fide written
Alternative Acquisition Proposal by a third party not affiliated with the
Company or any Person who was a director or executive officer of the Company as
of May 17, 2008 to purchase all the outstanding capital stock of the Company,
pursuant to a tender or exchange offer, a merger, a consolidation, a
recapitalization or other business transaction, or to purchase business or
businesses or assets that constitute or account for all or substantially all of
the consolidated net revenues of the Company and its Subsidiaries, taken as a
whole, and that (in each case): (A) was not obtained or made as a direct or
indirect result of a breach of Section 4.2 of the Agreement, or the
Confidentiality Agreement, (B) is not subject to a financing (or reverse
break-up fee payable in the event of failure to obtain financing) contingency
that is unlikely or uncertain to be satisfied, as determined in good faith by
the Company's Board of Directors, and (C) is determined in good faith by the
Company's Board of Directors, after consultation with the Company's financial
advisor and outside legal counsel and taking into account all the known terms
and conditions of such Alternative Acquisition Proposal, to contemplate a
transaction that: (x) if consummated would be more favorable to the Company's
stockholders than the transactions contemplated by the Agreement (taking into
account the terms of such Alternative Acquisition Proposal and any amendments to
the terms of the Agreement proposed by Parent in a binding written offer
provided by Parent to the Company in response to such Alternative Acquisition
Proposal; and (y) is reasonably capable of being consummated by the third party
on the terms of such Alternative Acquisition Proposal (taking into account the
relevant financial, legal and regulatory considerations associated with such
Alternative Acquisition Proposal) (it being understood that an executive officer
of the Company who elects to continue employment with such Person or its
Affiliates after the consummation of any Alternative Acquisition Transaction
shall not be deemed to be affiliated with the Company for purposes of this
definition).
TAX. "TAX" shall mean (i) any and all federal, state, local and foreign
taxes, duties, imposts, levies or assessments of any nature whatsoever imposed
by a tax authority, including income, gross receipts, profits, sales, use,
occupation, value added, ad valorem, transfer, franchise, withholding, payroll,
employment, excise or property taxes, together with any interest, penalties or
additions imposed with respect thereto, and (ii) any liability or obligations
with respect to any items described in clause "(i)" above, whether by contract,
as a successor or transferee or otherwise.
TAX RETURN. "TAX RETURN" shall mean any and all returns, reports,
declarations, claims for refund or information returns, statements or forms
(including any schedule, attachment or amendment thereto) with respect to Taxes.
TRIGGERING EVENT. "TRIGGERING EVENT" shall be deemed to have occurred if:
(a) the Board of Directors of the Company or any committee thereof shall for any
reason have failed to recommend that the Company's stockholders vote to adopt
the Agreement, or shall for any reason have withheld, withdrawn or rescinded the
Company Board Recommendation or modified, amended or changed or publicly
proposed to withhold, withdraw, rescind, modify, amend or change the Company
Board Recommendation in a manner adverse to Parent and Merger Sub; (b) the
Company shall have failed to include in the Proxy Statement/Prospectus the
Company Board Recommendation or a statement to the effect that the Board of
Directors of the Company has determined and believes that the Merger is fair to
and in the best interests of the Company's stockholders; (c) the Board of
Directors of the Company shall have failed to reaffirm its recommendation in
favor of the adoption of the Agreement within 15 business days after Parent
requests in writing that such recommendation be reaffirmed at any time following
the public announcement and during the pendency of an Alternative Acquisition
Proposal; (d) the Board of Directors of the Company or any committee thereof
shall have approved, endorsed or recommended any Alternative Acquisition
Proposal; (e) the Company shall have entered into any binding letter of intent
or similar document or any agreement, contract or commitment accepting any
Alternative Acquisition Proposal; and (f) a tender or exchange offer relating to
not less than 15% of the then outstanding shares of capital stock of the Company
shall have been commenced by a third party (other than Parent or any Affiliate
of Parent) and the Company shall not have sent to its stockholders, or filed
with the SEC, within 15 business days after the commencement of such tender or
exchange offer, a statement disclosing that the Company recommends rejection of
such tender or exchange offer.
UNCURED INACCURACY. There shall be deemed to be an "UNCURED INACCURACY" in
a representation or warranty of a party to the Agreement as of a particular date
only if such representation or warranty shall be inaccurate as of such date as
if such representation or warranty were made as of such date, and the inaccuracy
in such representation or warranty shall not have been cured since such date;
PROVIDED, HOWEVER, that if such representation or warranty by its terms speaks
as of the date of the Agreement or as of another particular date, then there
shall not be deemed to be an Uncured Inaccuracy in such representation or
warranty unless such representation or warranty shall have been inaccurate as of
such date, and the inaccuracy in such representation or warranty shall not have
been cured since such date.
EXHIBIT B
FORM OF CERTIFICATE OF INCORPORATION
OF THE SURVIVING CORPORATION
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
JAZZ TECHNOLOGIES INC.
ARTICLE I
The name of the corporation (this "Corporation") is:
JAZZ TECHNOLOGIES INC.
ARTICLE II
The address of this Corporation's registered office in the State of
Delaware is c/o Corporation Trust Company, 1209 Orange Street, in the City of
Wilmington, County of New Castle. The name of this Corporation's registered
agent at such address is The Corporation Trust Company.
The name and mailing address of the incorporator of this Corporation are:
[____________].
ARTICLE III
The nature of the business or purposes to be conducted or promoted is to
engage in any lawful act or activity for which corporations may be organized
under the General Corporation Law of Delaware ("GCL").
ARTICLE IV
This Corporation is authorized to issue one class of stock to be designated
"Common Stock," with a par value of $0.001 per share. The total number of shares
which this Corporation is authorized to issue is One Hundred (100) shares.
ARTICLE V
Except as otherwise provided in this Certificate of Incorporation, in
furtherance and not in limitation of the powers conferred by statute, the Board
of Directors is expressly authorized to make, repeal, alter, amend and rescind
any or all of the Bylaws of this Corporation.
ARTICLE VI
The number of directors of this Corporation shall be fixed from time to
time by the Bylaws or amendment thereof duly adopted by the board of directors
or by the stockholders.
ARTICLE VII
Elections of directors need not be by written ballot unless the Bylaws of
this Corporation shall so provide.
ARTICLE VIII
Meeting of stockholders of this Corporation may be held within or without
the State of Delaware, as the Bylaws may provide. The books of this Corporation
may be kept (subject to any provision contained in the statutes) outside the
State of Delaware at such place or places as may be designated from time to time
by the board of directors or in the Bylaws of this Corporation.
ARTICLE IX
A director of this Corporation shall not be personally liable to this
Corporation or its stockholders for monetary damages for any breach of fiduciary
duty as a director, except that this Article IX shall not eliminate or limit a
director's liability (i) for any breach of the director's duty of loyalty to
this Corporation or its stockholders, (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law,
(iii) pursuant to Section 174 of the GCL, or (iv) for any transaction from which
such director derived an improper personal benefit. If the GCL is amended after
the effective date of this Certificate of Incorporation to authorize corporate
action further eliminating or limiting the personal liability of directors, then
the liability of a director of this Corporation shall be eliminated or limited
to the fullest extent permitted by the GCL, as so amended from time to time.
Any repeal or modification of this Article IX shall not increase the
personal liability of any director of this Corporation for any act or occurrence
taking place prior to such repeal or modification, or otherwise adversely affect
any right or protection of a director of this Corporation existing at the time
of such repeal or modification.
The provisions of this Article IX shall not be deemed to limit or preclude
indemnification of a director by this Corporation for any liability of a
director which has not been eliminated by the provisions of this Article IX.
ARTICLE X
This Corporation shall indemnify to the full extent authorized or permitted
by law (as now or hereafter in effect) any person made, or threatened to be made
a party or witness to any action, suit or proceeding (whether civil or criminal
or otherwise) by reason of the fact that he, his testator or intestate, is or
was a director or an officer of this Corporation or by reason of the fact that
such person, at the request of this Corporation, is or was serving any other
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise, in any capacity. Nothing contained herein shall affect any rights to
indemnification to which employees other than directors and officers may be
entitled by law. No amendment to or repeal of this Article X shall apply to or
have any effect on any right to indemnification provided hereunder with respect
to any acts or omissions occurring prior to such amendment or repeal.
ARTICLE XI
Pursuant to GCL Section 203(b)(1), this Corporation shall not be governed
by the provisions of GCL Section 203.
ARTICLE XII
This Corporation reserves the right to amend, alter, change or repeal any
provision contained in this Certificate of Incorporation, in the manner now or
hereafter prescribed by statute, and all rights conferred upon stockholders
herein are granted subject to this reservation.
IN WITNESS WHEREOF, the undersigned has executed this Certificate of
Incorporation on this [__]th day of ________, 2008.
____________________
Name:
Title:
EXHIBIT C
FORM OF TAX REPRESENTATION LETTER (COMPANY)
[Company Letterhead]
______________ __, 2008
Cooley Godward Kronish LLP O'Melveny & Myers LLP
101 California Street, 5th floor 275 Battery Street, Suite 2600
San Francisco, CA 94111 San Francisco, CA 94111
Re: Merger pursuant to Agreement and Plan of Merger and Reorganization by
and among Tower Semiconductor Ltd. , Armstrong Acquisition Corp. and
Jazz Technologies, Inc.
Ladies and Gentlemen:
This letter is furnished to you in connection with your rendering of
opinions pursuant to Sections 5.2(e)(i) and 5.3(e)(i) of the Agreement and Plan
of Merger and Reorganization dated May 19, 2008 (the "MERGER AGREEMENT") by and
among Tower Semiconductor Ltd., an Israeli company ("PARENT"), Armstrong
Acquisition Corp., a Delaware corporation and wholly owned subsidiary of Parent
("MERGER SUB"), and Jazz Technologies, Inc., a Delaware corporation ("COMPANY").
Pursuant to the Merger Agreement, Merger Sub will merge with and into Company
(the "MERGER") and Company will become a wholly owned subsidiary of Parent.
Except as otherwise provided, capitalized terms not defined herein have the
meanings set forth in the Merger Agreement. References herein to the "IRC" refer
to the United States Internal Revenue Code of 1986, as amended, and references
to a "TREASURY REGULATION" refer to a regulation promulgated under the IRC.
After consulting with its counsel and auditors regarding the meaning of and
factual support for the following representations, the undersigned hereby
certifies and represents that the following representations are true, correct
and complete as of the date hereof and will continue to be true, correct and
complete as of the Effective Time and thereafter where relevant:
1. General Reorganization Representations
(i) The facts that relate to the Merger and related transactions, as
described in the Registration Statement (including the Proxy
Statement/Prospectus), as amended or supplemented through the date hereof,
are true, correct, and complete in all material respects and will be true,
correct, and complete in all material respects at the Effective Time (as if
made as of the Effective Time).
(ii) The fair market value of the Parent Ordinary Shares to be issued
to the Company shareholders in the Merger was approximately equal to the
fair market value of the shares of Company Common Stock to be surrendered
by the Company shareholders in the Merger.
(iii) At the Effective Time, there will not be outstanding any equity
interests in Company other than those disclosed in Sections 1.5 and 1.8 of
the Merger Agreement, or any warrants, options, convertible securities, or
any other type of right pursuant to which any person could acquire stock in
Company or any other equity interest in Company that, if exercised or
converted, would affect Parent's acquisition or retention of Control of
Company. As used in this Section 1, "CONTROL" means direct ownership of
stock possessing at least eighty percent (80%) of the total combined voting
power of all classes of stock entitled to vote and at least eighty percent
(80%) of the total number of shares of each other class of stock of the
corporation.
(iv) Except with respect to repurchases or other reacquisitions of
stock subject to repurchase from or forfeiture by terminated employees
pursuant to repurchase (or other reacquisition) rights obtained in the
ordinary course of business, following the Merger, Parent has no plan or
intention to reacquire or to cause or to allow any person related to Parent
within the meaning of Treasury Regulation Section 1.368-1(e)(3), (e)(4), or
(e)(5) to purchase, redeem, or otherwise reacquire any Parent Ordinary
Shares issued pursuant to the Merger Agreement.
(v) Other than pursuant to this Merger Agreement, neither Company nor
any Person related to Company within the meaning of Treasury Regulations
Sections 1.368-1(e)(3), (e)(4) and (e)(5) has redeemed, purchased or
otherwise acquired any Company stock in anticipation of the transactions
contemplated by the Merger Agreement (the "TRANSACTIONS") during the period
beginning with the commencement of negotiations (whether formal or
informal) regarding the Merger and ending at the Effective Time (the
"PRE-MERGER PERIOD"), or otherwise as part of a plan of which the
Transactions are a part. To Company's knowledge neither Parent nor any
Parent Affiliate will own beneficially or of record, or will have owned
beneficially or of record during the five years immediately prior to the
Effective Time, any Company stock, or other securities, options, warrants,
or instruments giving the holder thereof the right to acquire shares of
Company Common Stock or other securities offered by Company.
(vi) Other than in the ordinary course of business or pursuant to its
obligations under the Merger Agreement, Company has made no transfer of any
of its assets (including any distribution of assets with respect to, or in
redemption of, stock) in contemplation of the Transactions (or any other
corporate acquisition) or during the Pre-Merger Period.
(vii) In the Merger, Parent will acquire Company Common Stock solely
in exchange for Parent Ordinary Shares (other than any cash paid in lieu of
fractional shares, as described in paragraph (xv)). Company has no
knowledge of any Parent plan or intention to cause or permit the Surviving
Corporation to issue additional shares of its stock that would affect
Parent's acquisition or retention of Control of Company. For purposes of
this paragraph, shares of Company Common Stock exchanged in the Merger for
cash and other property (including, without limitation, cash paid to
Company stockholders in lieu of fractional Parent Ordinary Shares and cash
paid to redeem Parent Ordinary Shares that are issued in the Merger (except
as provided in paragraph (iii)) will be treated as shares of Company Common
Stock outstanding on the date of the Merger but not exchanged for shares of
Parent Ordinary Shares.
(viii) Immediately following the Effective Time, the Surviving
Corporation will be wholly owned directly by Parent. Company is not aware
of any Parent plan or intention: (i) to liquidate the Surviving Corporation
or merge the Surviving Corporation into another entity; (ii) to sell or
otherwise dispose of any shares or securities of, or other interests in,
the Surviving Corporation held by Parent; or (iii) to sell or otherwise
dispose of, or to cause the Surviving Corporation to sell or otherwise
dispose of, any of Merger Sub's or Company's assets, or of any of the
assets of Merger Sub or of Company acquired in the Merger; except with
respect to: (x) dispositions of assets in the ordinary course of business;
(y) transfers described in IRC ss.368(a)(2)(C), or in the applicable
Treasury Regulations; or (z) sales of the Surviving Corporation's assets to
unrelated third parties for fair market value that do not prevent the
continuation of Company's "historic business" or use of "historic business
assets" as described in paragraph (vii) below.
(ix) Company conducts a historic business within the meaning of
Treasury Regulation Section 1.368-1(d), and no assets of Company have been
acquired or sold, transferred, or otherwise disposed of that would prevent
Parent, or a member of its qualified group of corporations, from continuing
such "historic business" or from using a "significant portion" of Company's
"historic business assets" in a business following the Merger. Company has
no knowledge of any plan or intention by Parent, or a member of its
qualified group of corporations (as defined by Treasury Regulations Section
1.368-1(d)(4)(ii)), to cause or allow the Merger to fail to satisfy the
requirement for a reorganization set forth in Treasury Regulations Section
1.368-1(d) by causing or allowing the Surviving Corporation to discontinue
the historic business of Company (or, alternatively, if Company has more
than one line of business, by causing or allowing the Surviving Corporation
to discontinue all of the significant lines of Company's historic business)
and failing to use a significant portion of Company's historic business
assets in a business. For purposes of this representation, Parent will be
deemed to satisfy the foregoing representation if (a) the members of
Parent's qualified group (as defined in Treasury Regulations Section
1.368-1(d)(4)(ii)), in the aggregate, continue the historic business of
Company or use a significant portion of Company's historic business assets
in a business or (b) the foregoing activities are undertaken by a
partnership as contemplated by Treasury Regulations Section 1.368-1(d)(4).
(x) Company is not an "INVESTMENT COMPANY" within the meaning of IRC
ss.ss.368(a)(2)(F)(iii) and (iv). As used in Sections 1 and 2 hereof, an
"Investment Company" means a regulated investment company, a real estate
investment trust, or a corporation 50 percent or more of the value of whose
total assets are stock and securities and 80 percent or more of the value
of whose total assets are assets held for investment. In making the
50-percent and 80-percent determinations under the preceding sentence,
stock and securities in any subsidiary corporation shall be disregarded and
the parent corporation shall be deemed to own its ratable share of the
subsidiary's assets, and a corporation shall be considered a subsidiary if
the parent owns 50 percent or more of the combined voting power of all
classes of stock entitled to vote, or 50 percent or more of the total value
of shares of all classes of stock outstanding. For this purpose, in
determining total assets, cash and cash items (including receivables), and
Government securities shall be excluded. The term "securities" includes
obligations of state and local governments, commodity futures contracts,
shares of regulated investment companies and real estate investment trusts,
and other investments constituting a security within the meaning of the
Investment Company Act of 1940 (15 U.S.C. 80a-2(36)).
(xi) Except as specifically set forth in the Merger Agreement, Company
will pay its expenses, if any, incurred in connection with the Transaction
and has not agreed to assume, nor will it directly or indirectly assume,
any expense or other liability, whether fixed or contingent, of any Company
shareholder. To Company's knowledge, Parent has retained no Company
shareholder to act as agent for Parent in connection with the Merger or
approval thereof and Parent will reimburse no Company shareholder for
shares of Company Common Stock such shareholder may have purchased or for
other obligations such shareholder may have incurred.
(xii) There is no intercorporate indebtedness existing between Parent
and Company that was issued, acquired, or will be settled at a discount.
(xiii) The fair market value of Company's assets will exceed the
amount of its liabilities plus the liabilities, if any, to which the
Company's assets are subject.
(xiv) All Parent Ordinary Shares issued in the Merger will be shares
of voting stock and, to Company's knowledge, there are no restrictions on
the voting rights with respect to such shares.
(xv) The payment of cash in lieu of fractional shares of Parent
Ordinary Shares in the Merger is solely for the purpose of avoiding the
expense and inconvenience to Parent of issuing fractional shares of Parent
Ordinary Shares and does not represent separately bargained-for
consideration for Company Common Stock. The total cash consideration that
will be paid in the Merger to the Company shareholders instead of issuing
fractional shares of Parent Ordinary Shares will not exceed one percent of
the total consideration that will be issued in the transaction to the
Company shareholders in exchange for their Company Common Stock. The
fractional share interests of each Company shareholder will be aggregated,
and, with the possible exception of Company shareholders that hold shares
of Company Common Stock through multiple brokers or multiple accounts, no
Company shareholder will receive cash in lieu of Parent Ordinary Shares in
an amount equal to or greater than the value of one full share of Parent
Ordinary Shares.
(xvi) Not more than fifty percent (50%) of the total voting power and
not more than fifty percent (50%) of the total value of the stock of Parent
will be received in the Transaction, in the aggregate, by Company
shareholders who are U.S. persons in exchange for their shares of Company
Common Stock as determined pursuant to the rules set forth in Treasury
Regulation Section 1.367(a)-3(c).
(xvii) Immediately after the Merger, not more than fifty percent (50%)
of the total voting power and not more than fifty percent (50%) of the
total value of the stock of Parent will be owned, in the aggregate (taking
into account, to Company's knowledge, any attribution or constructive
ownership rules of Treasury Regulation Section 1.367(a)-3(c)), by U.S.
persons that are at such time either officers or directors of Company or
that owned stock representing five percent (5%) or more of the total voting
power or total value of the stock of Company immediately prior to the
Merger.
(xviii) To Company's knowledge, for the entire thirty-six month period
immediately preceding the Merger, either Parent or any qualified subsidiary
(as defined in Treasury Regulation Section 1.367(a)-3(c)(5)(vii)) or any
qualified partnership (as defined in Treasury Regulation Section
1.367(a)-3(c)(5)(viii)) has been engaged in an active trade or business
outside the United States, within the meaning of Treasury Regulation
Section 1.367(a)-3(c)(3). To Company's knowledge Parent has no plan or
intention to substantially dispose of or discontinue (or to allow any
qualified subsidiary or qualified partnership to substantially dispose of
or discontinue) the active trade or business referred to in the preceding
sentence.
(xix) To Company's knowledge the fair market value of the total
outstanding equity of Parent (not taking into account assets acquired
outside the ordinary course of business, unless Parent is permitted to take
such assets into account pursuant to Treasury Regulation Section
1.367(a)-3(c)(3)(iii)), is at least equal to the fair market value of the
total outstanding equity of Company.
(xx) Neither the Company nor any Subsidiary of the Company has taken
any action or failed to take any action that is reasonably likely to
prevent or impede the Merger from qualifying as a reorganization within the
meaning of Section 368(a) of the Code and a transaction that is not subject
to Section 367(a)(1) of the Code.
2. Relating to Merger Sub
(i) To Company's knowledge Merger Sub was formed solely for the
purposes of effecting the Merger and has conducted no business or other
activities except in connection with the Merger.
(ii) To Company's knowledge, in the Merger, Merger Sub will have no
liabilities assumed by Company and will not transfer to Company any assets
subject to liabilities.
(iii) At the time of the Merger and at the Effective Time, Company
will hold at least ninety percent (90%) of the fair market value of the net
assets and at least seventy percent (70%) of the fair market value of the
gross assets held by Merger Sub. In addition, after the Merger, at least
ninety percent (90%) of the fair market value of the net assets and at
least seventy percent (70%) of the fair market value of the gross assets
held by Company immediately prior to the Merger will continue to be held by
the Surviving Corporation after the Merger. For the purpose of this
representation, the following assets of Company or of Merger Sub, as the
case may be, will be treated as property held by Company or Merger Sub, as
the case may be, immediately prior to the Merger but not by the Surviving
Corporation subsequent to the Merger: (i) assets disposed of by Company or
the Surviving Corporation (other than assets sold to unrelated third
parties for fair market value) subsequent to the Merger; (ii) assets of
Company or Merger Sub (other than assets transferred from Merger Sub to
Company in the Merger) that were, to Company's knowledge, disposed of prior
to the Merger and in contemplation thereof; (iii) assets used by Company or
Merger Sub to pay other expenses or liabilities incurred in connection with
the Merger; and (v) assets used to make distributions, redemptions, or
other payments in respect of shares of Company Common Stock or stock of
Merger Sub or rights to acquire such stock (including payments treated as
such for tax purposes) that were, to Company's knowledge, made in
contemplation of the Merger or that are related thereto, or that were, to
Company's knowledge, made during the Pre-Merger Period.
(iv) To Company's knowledge Merger Sub is not an Investment Company.
(v) Except as specifically set forth in the Merger Agreement, Merger
Sub will pay its expenses, if any, incurred in connection with the
Transaction and has not agreed to assume, nor will it directly or
indirectly assume, any expense or other liability, whether fixed or
contingent, of any Company shareholder.
(vi) There is no intercorporate indebtedness existing between Merger
Sub and Company that was issued, acquired, or will be settled at a
discount.
Notwithstanding anything herein to the contrary, the undersigned makes no
representations regarding any actions or conduct of Company pursuant to
Parent's exercise of control over Company after the Merger.
The undersigned recognizes that (i) your opinions will be based on the
representations set forth herein and on the statements contained in the
Merger Agreement and documents related thereto, and (ii) your opinions will
be subject to certain limitations and qualifications including that they
may not be relied upon if any such representations are not accurate in all
material respects at all relevant times. If, prior to the Effective Time,
any of the representations set forth herein cease to be accurate in any
material respect, the undersigned agrees to deliver to you immediately a
written notice to that effect. The undersigned recognizes that your
opinions will not address any tax consequences of the Merger or any action
taken in connection therewith except as expressly set forth in such
opinions.
Very truly yours,
JAZZ TECHNOLOGIES, INC.
By:_______________________
Name:_____________________
Title:____________________
EXHIBIT D
FORM OF TAX REPRESENTATION LETTER (PARENT)
[Parent Letterhead]
______________ __, 2008
O'Melveny & Myers LLP Cooley Godward Kronish LLP
275 Battery Street, Suite 2600 101 California Street, 5th floor
San Francisco, CA 94111 San Francisco, CA 94111
Re: Merger pursuant to Agreement and Plan of Merger and Reorganization by
and among Tower Semiconductor Ltd. , Armstrong Acquisition Corp. and
Jazz Technologies, Inc.
Ladies and Gentlemen:
This letter is furnished to you in connection with your rendering of
opinions pursuant to Sections 5.2(e)(i) and 5.3(e)(i) of the Agreement and Plan
of Merger and Reorganization dated May 19, 2008 (the "MERGER AGREEMENT") by and
among Tower Semiconductor Ltd., an Israeli company ("PARENT"), Armstrong
Acquisition Corp., a Delaware corporation and wholly owned subsidiary of Parent
("MERGER SUB"), and Jazz Technologies, Inc., a Delaware corporation ("COMPANY").
Pursuant to the Merger Agreement, Merger Sub will merge with and into Company
(the "MERGER") and Company will become a wholly owned subsidiary of Parent.
Except as otherwise provided, capitalized terms not defined herein have the
meanings set forth in the Merger Agreement. References herein to the "IRC" refer
to the United States Internal Revenue Code of 1986, as amended, and references
to a "TREASURY REGULATION" refer to a regulation promulgated under the IRC.
After consulting with their counsel and auditors regarding the meaning of
and factual support for the following representations, the undersigned hereby
certify and represent that the following representations are true, correct and
complete as of the date hereof and will continue to be true, correct and
complete as of the Effective Time and thereafter where relevant:
1. General Reorganization Representations
(i) The facts that relate to the Merger and related transactions, as
described in the Registration Statement (including the Proxy
Statement/Prospectus), as amended or supplemented through the date hereof,
are true, correct, and complete in all material respects and will be true,
correct, and complete in all material respects at the Effective Time (as if
made as of the Effective Time).
(ii) The fair market value of the Parent Ordinary Shares to be issued
to each Company shareholder in the Merger is approximately equal to the
fair market value of the shares of Company Common Stock to be surrendered
by such Company shareholder in the Merger.
(iii) Parent is in "Control" of Merger Sub. As used in this Section 1,
"CONTROL" means direct ownership of stock possessing at least eighty
percent (80%) of the total combined voting power of all classes of stock
entitled to vote and at least eighty percent (80%) of the total number of
shares of each other class of stock of the corporation.
(iv) Except with respect to acquisitions which are made on the open
market through a broker at the prevailing market price from a shareholder
whose identity is not known to Parent and are made pursuant to a stock
repurchase program that was not a matter negotiated with Company or any
Company shareholder, does not favor participation by any Company
shareholder and pursuant to which the number of shares repurchased does not
exceed the number of Parent shares outstanding prior to the Merger ("Open
Market Acquisitions"), Company has no knowledge of any Parent plan or
intention to reacquire or to cause or to allow any person related to Parent
within the meaning of Treasury Regulation Section 1.368-1(e)(3), (e)(4), or
(e)(5) to purchase, redeem, or otherwise reacquire any Parent Ordinary
Shares issued pursuant to the Merger Agreement.
(v) Other than pursuant to this Merger Agreement, neither Parent nor
any Person related to Parent within the meaning of Treasury Regulations
Sections 1.368-1(e)(3), (e)(4) and (e)(5) has acquired any shares of
Company Common Stock in contemplation of the transactions contemplated by
the Merger Agreement (the "TRANSACTION") during the period beginning with
the commencement of negotiations (whether formal or informal) regarding the
Merger and ending at the Effective Time (the "PRE-MERGER PERIOD"), or
otherwise as part of a plan of which the Transaction is a part. Neither
Parent nor any Parent Affiliate will own beneficially or of record, or will
have owned beneficially or of record during the five years immediately
prior to the Effective Time, any shares of Company Common Stock, or other
securities, options, warrants, or instruments giving the holder thereof the
right to acquire shares of Company Common Stock or other securities offered
by Company.
(vi) In the Merger, Parent will acquire Company Common Stock solely in
exchange for Parent Ordinary Shares (other than any cash paid in lieu of
fractional shares, as described in paragraph (xv).
(vii) Following the Merger, Parent has no current plan or intention to
cause or permit the Surviving Corporation to issue additional shares of its
stock that would affect Parent's acquisition or retention of Control of
Company. For purposes of this paragraph, shares of Company Common Stock
exchanged in the Merger for cash and other property (including, without
limitation, cash paid to Company stockholders in lieu of fractional Parent
Ordinary Shares and cash paid to redeem Parent Ordinary Shares that are
issued in the Merger (except as provided in paragraph (iii)) will be
treated as shares of Company Common Stock outstanding on the date of the
Merger but not exchanged for shares of Parent Ordinary Shares.
(viii) Immediately following the Effective Time, the Surviving
Corporation will be wholly owned directly by Parent. Parent has no current
plan or intention: (i) to liquidate the Surviving Corporation or merge the
Surviving Corporation into another entity; (ii) to sell or otherwise
dispose of any shares or securities of, or other interests in, the
Surviving Corporation held by Parent; or (iii) to sell or otherwise dispose
of, or to cause the Surviving Corporation to sell or otherwise dispose of,
any of Merger Sub's or Company's assets, or of any of the assets of Merger
Sub or of Company acquired in the Merger; except with respect to: (x)
dispositions of assets in the ordinary course of business; (y) transfers
described in IRC ss.368(a)(2)(C), or in the applicable Treasury
Regulations; or (z) sales of thE Surviving Corporation's assets to
unrelated third parties for fair market value that do not prevent the
continuation of Company's "historic business" or use of "historic business
assets" as described in paragraph (ix) below.
(ix) There is no current plan or intention by Parent, or a member of
its qualified group of corporations (as defined by Treasury Regulations
Section 1.368-1(d)(4)(ii)), to cause or allow the Merger to fail to satisfy
the requirement for a reorganization set forth in Treasury Regulations
Section 1.368-1(d) by causing or allowing the Surviving Corporation to
discontinue the historic business of Company (or, alternatively, if Company
has more than one line of business, by causing or allowing the Surviving
Corporation to discontinue all of the significant lines of Company's
historic business) and failing to use a significant portion of Company's
historic business assets in a business. For purposes of this
representation, Parent will be deemed to satisfy the foregoing
representation if (a) the members of Parent's qualified group (as defined
in Treasury Regulations Section 1.368-1(d)(4)(ii)), in the aggregate,
continue the historic business of Company or use a significant portion of
Company's historic business assets in a business or (b) the foregoing
activities are undertaken by a partnership as contemplated by Treasury
Regulations Section 1.368-1(d)(4).
(x) Parent is not an "INVESTMENT COMPANY" within the meaning of IRC
ss.ss.368(a)(2)(F)(iii) and (iV). As used in Sections 1 and 2 hereof, an
"Investment Company" means a regulated investment company, a real estate
investment trust, or a corporation 50 percent or more of the value of whose
total assets are stock and securities and 80 percent or more of the value
of whose total assets are assets held for investment. In making the
50-percent and 80-percent determinations under the preceding sentence,
stock and securities in any subsidiary corporation shall be disregarded and
the parent corporation shall be deemed to own its ratable share of the
subsidiary's assets, and a corporation shall be considered a subsidiary if
the parent owns 50 percent or more of the combined voting power of all
classes of stock entitled to vote, or 50 percent or more of the total value
of shares of all classes of stock outstanding. For this purpose, in
determining total assets, cash and cash items (including receivables), and
Government securities shall be excluded. The term "securities" includes
obligations of state and local governments, commodity futures contracts,
shares of regulated investment companies and real estate investment trusts,
and other investments constituting a security within the meaning of the
Investment Company Act of 1940 (15 U.S.C. 80a-2(36)).
(xi) Except as specifically set forth in the Merger Agreement, Parent
will pay its expenses, if any, incurred in connection with the Transaction
and has not agreed to assume, nor will it directly or indirectly assume,
any expense or other liability, whether fixed or contingent, of any Company
shareholder. Parent has retained no Company shareholder to act as agent for
Parent in connection with the Merger or approval thereof. Parent will
reimburse no Company shareholder for shares of Company Common Stock such
shareholder may have purchased or for other obligations such shareholder
may have incurred.
(xii) There is no intercorporate indebtedness existing between Parent
and Company that was issued, acquired, or will be settled at a discount.
(xiii) Immediately after the Merger, the fair market value of the
Surviving Corporation's assets will exceed the amount of its liabilities
plus the fair market value of the liabilities, if any, to which the
Surviving Corporation's assets are subject.
(xiv) All Parent Ordinary Shares issued in the Merger will be shares
of voting stock and, to Parent's Knowledge, there are no restrictions on
the voting rights with respect to such shares.
(xv) The payment of cash in lieu of fractional shares of Parent
Ordinary Shares in the Merger is solely for the purpose of avoiding the
expense and inconvenience to Parent of issuing fractional shares of Parent
Ordinary Shares and does not represent separately bargained-for
consideration for Company Common Stock. The total cash consideration that
will be paid in the Merger to the Company shareholders instead of issuing
fractional shares of Parent Ordinary Shares will not exceed one percent of
the total consideration that will be issued in the transaction to the
Company shareholders in exchange for their Company Common Stock. The
fractional share interests of each Company shareholder will be aggregated,
and, with the possible exception of Company shareholders that hold shares
of Company Common Stock through multiple brokers or multiple accounts, no
Company shareholder will receive cash in lieu of Parent Ordinary Shares in
an amount equal to or greater than the value of one full share of Parent
Ordinary Shares.
(xvi) To Company's knowledge, Parent has no plan or intention to
liquidate Company, to merge Company into another corporation, to cause the
Company to sell or otherwise dispose of any of its assets (except for
dispositions in the ordinary course of business) or to sell or otherwise
dispose of any Company Common Stock acquired in the transaction, except for
transfers .
(xvii) Not more than fifty percent (50%) of the total voting power and
not more than fifty percent (50%) of the total value of the stock of Parent
will be received in the Transaction, in the aggregate, by Company
shareholders who are U.S. persons in exchange for their shares of Company
Common Stock as determined pursuant to the rules set forth in Treasury
Regulation Section 1.367(a)-3(c).
(xviii) Immediately after the Merger, not more than fifty percent
(50%) of the total voting power and not more than fifty percent (50%) of
the total value of the stock of Parent stock will be owned, in the
aggregate (taking into account, to Parent's Knowledge, any attribution or
constructive ownership rules of Treasury Regulation Section 1.367(a)-3(c)),
by U.S. persons that are at such time either officers or directors of
Company or that owned stock representing five percent (5%) or more of the
total voting power or total value of the stock of Company immediately prior
to the Merger.
(xix) For the entire thirty-six month period immediately preceding
the Merger, either Parent or any qualified subsidiary (as defined in
Treasury Regulation Section 1.367(a)-3(c)(5)(vii)) or any qualified
partnership (as defined in Treasury Regulation Section
1.367(a)-3(c)(5)(viii)) has been engaged in an active trade or business
outside the United States, within the meaning of Treasury Regulation
Section 1.367(a)-3(c)(3). Parent has no plan or intention to substantially
dispose of or discontinue (or to allow any qualified subsidiary or
qualified partnership to substantially dispose of or discontinue) the
active trade or business referred to in the preceding sentence.
(xx) The fair market value of the total outstanding equity of Parent
(not taking into account assets acquired outside the ordinary course of
business, unless Parent is permitted to take such assets into account by
Treasury Regulation Section 1.367(a)-3(c)(3)(iii)), is at least equal to
the fair market value of the total outstanding equity of Company.
(xxi) Parent has not taken any action or failed to take any action
that is reasonably likely to prevent or impede the Merger from qualifying
as a reorganization within the meaning of Section 368(a) of the Code and a
transaction that is not subject to Section 367(a)(1) of the Code.
2. Relating to Merger Sub
(i) Merger Sub was formed solely for the purposes of effecting the
Merger and has conducted no business or other activities except in
connection with the Merger.
(ii) In the Merger, Merger Sub will have no liabilities assumed by
Company and will not transfer to Company any assets subject to liabilities.
(iii) At least ninety percent (90%) of the fair market value of the
net assets and at least seventy percent (70%) of the fair market value of
the gross assets held by Merger Sub immediately prior to the Merger will be
held by the Surviving Corporation after the Merger. In addition, after the
Merger, at least ninety percent (90%) of the fair market value of the net
assets and at least seventy percent (70%) of the fair market value of the
gross assets held by Company immediately prior to the Merger will continue
to be held by the Surviving Corporation after the Merger. For the purpose
of this representation, the following assets of Company or of Merger Sub,
as the case may be, will be treated as property held by Company or Merger
Sub, as the case may be, immediately prior to the Merger but not by the
Surviving Corporation subsequent to the Merger: (i) assets disposed of by
Company or the Surviving Corporation (other than assets sold to unrelated
third parties for fair market value) subsequent to the Merger; (ii) assets
of Company or Merger Sub (other than assets transferred from Merger Sub to
Company in the Merger) that were, to Parent's Knowledge, disposed of prior
to the Merger and in contemplation thereof; (iii) assets used by Company or
Merger Sub to pay other expenses or liabilities incurred in connection with
the Merger; (iv) assets used to make payments pursuant to the exercise of
appraisal rights; and (v) assets used to make distributions, redemptions,
or other payments in respect of shares of Company Common Stock or stock of
Merger Sub or rights to acquire such stock (including payments treated as
such for tax purposes) that were, to Parent's Knowledge, made in
contemplation of the Merger or that are related thereto, or that were, to
Parent's Knowledge, made during the Pre-Merger Period.
(iv) Merger Sub is not an Investment Company.
(v) Except as specifically set forth in the Merger Agreement, Merger
Sub will pay its expenses, if any, incurred in connection with the
Transaction and has not agreed to assume, nor will it directly or
indirectly assume, any expense or other liability, whether fixed or
contingent, of any Company shareholder.
(vi) There is no intercorporate indebtedness existing between Merger
Sub and Company that was issued, acquired, or will be settled at a
discount.
(vii) Merger Sub has not taken any action or failed to take any action
that is reasonably likely to prevent or impede the Merger from qualifying
as a reorganization within the meaning of Section 368(a) of the Code and a
transaction that is not subject to Section 367(a)(1) of the Code.
The undersigned recognize that (i) your opinions will be based on the
representations set forth herein and on the statements contained in the
Merger Agreement and documents related thereto, and (ii) your opinions will
be subject to certain limitations and qualifications including that they
may not be relied upon if any such representations are not accurate in all
material respects at all relevant times. If, prior to the Effective Time,
any of the representations set forth herein cease to be accurate in any
material respect, the undersigned agree to deliver to you immediately a
written notice to that effect. The undersigned recognize that your opinions
will not address any tax consequences of the Merger or any action taken in
connection therewith except as expressly set forth in such opinions.
Very truly yours,
PARENT
By:_____________________________________
Name:___________________________________
Title:__________________________________
MERGER SUB
By:_____________________________________
Name:___________________________________
Title:__________________________________