UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): December 20, 2005
DIODES INCORPORATED
(Exact name of registrant as specified in its charter)
Delaware 1-5740 95-2039518
(State or other jurisdiction (Commission File Number) (I.R.S. Employer Identification No.)
of incorporation or organization)
3050 East Hillcrest Drive
Westlake Village, California 91362
(Address of principal executive offices) (Zip Code)
(805) 446-4800
(Registrant's telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
[_] Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
[_] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[_] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[_] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Item 1.01. Entry into a Material Agreement.
Stock Purchase Agreement
On December 20, 2005, DII Taiwan Corporation Ltd. ("DII"), a wholly
owned subsidiary of Diodes Incorporated formed under the laws of Taiwan, entered
into a Stock Purchase Agreement (the "Stock Purchase Agreement") with Anachip
Corporation, a Taiwan corporation ("Anachip"), Lite-On Semiconductor Corporation
("LSC"), Shin Sheng Investment Limited ("SSIL") and Sun Shining Investment Corp.
("SSIC").
The following description of the Stock Purchase Agreement (and the
exhibits thereto) does not purport to be complete and is qualified in its
entirety by reference to the copy of the Stock Purchase Agreement (and the
exhibits thereto), which is filed as Exhibit 2.1 to this Report and is
incorporated herein by this reference.
Under the Stock Purchase Agreement, DII will purchase from LSC, SSIL
and SSIC (collectively, the "Selling Stockholders") 40,470,212 of the 50,000,000
issued and outstanding shares of the capital stock of Anachip (collectively, the
"Shares"). The purchase price will be NT$20.00 (approximately U.S.$0.60) per
Share, for an aggregate purchase price of NT$809,404,240 (approximately
U.S.$24.3 million). The purchase price will be payable in cash as follows: (i)
NT$728,463,816 will be payable on the closing date and (ii) NT$80,940,424 (the
"Holdback Amount") will be payable on December 31, 2006. DII will have the right
to set off against the Holdback Amount the amount of any claim for
indemnification arising under the Stock Purchase Agreement.
The Stock Purchase Agreement contains customary representations and
warranties. The representations and warranties have been made solely for the
benefit of the parties to the Stock Purchase Agreement and should not be relied
on by any other person. In addition, such representations and warranties (i)
have been qualified by disclosure schedules, (ii) are subject to the materiality
standards set forth in the Stock Purchase Agreement, which may differ from what
may be considered to be material by investors, and (iii) were made only as of
the date of the Stock Purchase Agreement or such other date as specified in the
Stock Purchase Agreement.
The Stock Purchase Agreement provides for DII to be indemnified by the
Selling Stockholders, subject to certain exceptions and limitations, for losses
resulting from the breach of the representations, warranties and covenants of
the Selling Stockholders or Anachip and certain tax liabilities. The obligations
of DII and the Selling Stockholders to complete the purchase and sale of the
Shares is subject to customary conditions. Any party may terminate the Stock
Purchase Agreement if the closing has not occurred on or before March 31, 2006.
Proposed Merger
In December 2005, DII purchased from employees and other stockholders
of Anachip an aggregate of 9,383,613 additional shares of the capital stock of
Anachip for NT$20.00 per share for an aggregate of NT$ 187,672,260
(approximately U.S.$5.6 million). Following the completion of the purchase and
sale of the Shares, DII will hold more than 99% of the issued and outstanding
shares of the capital stock of Anachip, and DII intends to merge with Anachip.
In the merger, each outstanding share of the capital stock of Anachip (other
than those held by DII) will be cancelled and, thereafter, will represent only
the right to receive NT$20.00, subject to statutory appraisal rights.
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Wafer Purchase Agreement
Concurrent with the purchase and sale of the Shares, Anachip will enter
into a Wafer Purchase Agreement (the "Wafer Purchase Agreement") with LSC,
pursuant to which LSC will sell to Anachip, according to Anachip's requirements,
during the two year period ending on December 31, 2007, wafers of the same or
similar type, and meeting the same specifications, as those wafers currently
being purchased from LSC by Anachip. Anachip will purchase such wafers on terms
(including purchase price, delivery schedule, and payment terms) no less
favorable to Anachip than those terms on which Anachip currently purchases such
wafers from LSC; provided, however, that the purchase price will be the lower of
the current price or the most favorable customer pricing. If the price of raw
wafers increases by more than 20% within any six-month period, Anachip and LSC
will renegotiate in good faith the price of wafers to reflect the cost increase.
A copy of the proposed form of Wafer Purchase Agreement is attached as
Exhibit B to the Stock Purchase Agreement.
Item 7.01. Regulation FD Disclosure.
On December 20, 2005, the Company issued a press release announcing the
execution of the Stock Purchase Agreement. A copy of the press release is
attached as Exhibit 99.1 to this Report.
The information in this Item 7.01, including Exhibit 99.1, will not be
treated as filed for the purposes of Section 18 of the Securities Exchange Act
of 1934 (the "Exchange Act") or otherwise subject to the liabilities of that
section. This information will not be incorporated by reference into a filing
under the Securities Act of 1933, or into another filing under the Exchange Act,
unless that filing expressly refers to specific information in this Report. The
furnishing of the information in this Item 7.01 is not intended to, and does
not, constitute a representation that such furnishing is required by Regulation
FD or that the information in this Item 7.01 is material information that is not
otherwise publicly available.
Cautionary Information Regarding Forward-Looking Statements
Except for the historical and factual information contained in the
press release attached as Exhibit 99.1, the matters set forth in the press
release (including statements as to: the expected benefits of the acquisition,
including the acquisition being accretive to Diodes' 2006 earnings; the
efficiencies, cost savings, market profile, financial strength, competitive
ability and position of the combined company; and other statements identified by
words such as "estimates," "expects," "projects," "plans" and similar
expressions) are forward-looking statements within the meaning of the "safe
harbor" provisions of the Private Securities Litigation Reform Act of 1995.
These forward-looking statements are subject to risks and uncertainties that may
cause actual results to differ materially, including: the possibility that the
transaction may not be consummated, including as a result of any of the
conditions precedent; the ability to obtain government approvals required for
closing the acquisition; the risk that Anachip's business will not be integrated
successfully into Diodes'; the risk that the expected benefits of the
acquisition may not be realized, including the realization of the accretive
effect of the acquisition; and the impact of competition and other risk factors
relating to our industry and business as detailed from time to time in Diodes'
reports filed with the SEC. You should not place undue reliance on these
forward-looking statements, which speak only as of the date of the press
release. Diodes undertakes no obligation to update publicly any forward-looking
statements, whether as a result of new information, future events or otherwise.
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Item 9.01. Financial Statements and Exhibits.
(c) Exhibits.
Exhibit
Number Description
------ -----------
2.1* Stock Purchase Agreement dated as of December 20,
2005, by and among DII Taiwan Corporation Ltd.,
Anachip Corporation, Lite-On Semiconductor
Corporation, Shin Sheng Investment Limited and
Sun Shining Investment Corp.
99.1 Press release dated December 20, 2005 entitled:
"Diodes Incorporated Signs Definitive Agreement
for Anachip Acquisition: Acquisition Expected to
be Accretive to 2006 Earnings."
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* All schedules have been omitted in reliance upon Item 601(b)(2) of Regulation
S-K. The Company agrees to furnish the SEC, supplementally, with a copy of any
omitted schedule upon request.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DIODES INCORPORATED
Date: December 20, 2005 By /s/ Carl C. Wertz
--------------------------
Carl C. Wertz,
Chief Financial Officer
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EXHIBIT INDEX
Exhibit
Number Description
------ -----------
2.1* Stock Purchase Agreement dated as of December 20,
2005, by and among DII Taiwan Corporation Ltd.,
Anachip Corporation, Lite-On Semiconductor
Corporation, Shin Sheng Investment Limited and
Sun Shining Investment Corp.
99.1 Press release dated December 20, 2005 entitled:
"Diodes Incorporated Signs Definitive Agreement
for Anachip Acquisition: Acquisition Expected to
be Accretive to 2006 Earnings."
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* All schedules have been omitted in reliance upon Item 601(b)(2) of Regulation
S-K. The Company agrees to furnish the SEC, supplementally, with a copy of any
omitted schedule upon request.
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Exhibit 2.1
STOCK PURCHASE AGREEMENT
By and Among
DII TAIWAN CORPORATION LTD.,
LITE-ON SEMICONDUCTOR CORPORATION,
SHIN SHENG INVESTMENT LIMITED,
SUN SHINING INVESTMENT CORP.
and
ANACHIP CORPORATION
December 20, 2005
TABLE OF CONTENTS
Page
----
ARTICLE I PURCHASE AND SALE OF SHARES.............................................................................1
1.1 Purchase and Sale of Shares.....................................................................1
1.2 Purchase Price..................................................................................1
1.3 Payment of Purchase Price.......................................................................1
1.4 Closing.........................................................................................2
1.5 Closing Deadline................................................................................2
ARTICLE II REPRESENTATIONS AND WARRANTIES OF SELLING STOCKHOLDERS.................................................2
2.1 Due Formation...................................................................................3
2.2 Shares..........................................................................................3
2.3 Title to Shares.................................................................................3
2.4 Articles of Incorporation.......................................................................3
2.5 Subsidiaries....................................................................................3
2.6 Authority.......................................................................................4
2.7 No Violation of Law and Agreements..............................................................4
2.8 Financial Statements............................................................................4
2.9 No Undisclosed Liabilities......................................................................5
2.10 Absence of Certain Changes......................................................................5
2.11 Tax Returns and Payments........................................................................6
2.12 Compliance with Laws............................................................................7
2.13 Contracts and Other Agreements..................................................................8
2.14 Real Estate.....................................................................................9
2.15 Environmental Matters..........................................................................11
2.16 Intellectual Property and Computer Software....................................................13
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2.17 Title to Properties, Absence of Liens and Encumbrances.........................................15
2.18 Permits........................................................................................15
2.19 Labor and Employment Matters...................................................................15
2.20 Employee Benefits Plans........................................................................16
2.21 Litigation.....................................................................................17
2.22 Insurance......................................................................................17
2.23 Officers, Directors and Key Employees..........................................................17
2.24 Conditions of Tangible Assets and Inventories..................................................17
2.25 Bank Accounts..................................................................................18
2.26 Powers of Attorney; Guarantees.................................................................18
2.27 Relations with Suppliers.......................................................................18
2.28 Relations with Customers.......................................................................18
2.29 Accounts Receivables...........................................................................18
2.30 Transactions with Affiliates...................................................................19
2.31 Data Processing................................................................................19
2.32 Brokerage......................................................................................19
2.33 Products.......................................................................................19
2.34 Accuracy of Representations....................................................................19
ARTICLE III REPRESENTATIONS AND WARRANTIES OF BUYER..............................................................20
3.1 Organization and Standing......................................................................20
3.2 Authority......................................................................................20
3.3 No Violation of Law and Agreements.............................................................20
3.4 Brokerage......................................................................................20
ARTICLE IV COVENANTS AND AGREEMENTS OF SELLING STOCKHOLDERS AND COMPANY..........................................21
4.1 Conduct of Business............................................................................21
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4.2 Efforts to Close...............................................................................21
4.3 Continued Effectiveness of Representations and Warranties of Selling Stockholders..............21
4.4 Corporate Examinations and Investigations......................................................21
4.5 Lessor Certificates............................................................................22
4.6 Insurance......................................................................................22
4.7 Cooperation....................................................................................22
4.8 Expenses.......................................................................................22
4.9 Further Assurances.............................................................................22
4.10 Hsinchu Science Park...........................................................................22
4.11 No Solicitation of Transactions................................................................22
4.12 Noncompetition.................................................................................22
4.13 Appraisal Costs................................................................................24
4.14 Severance Costs................................................................................24
ARTICLE V COVENANTS AND AGREEMENTS OF BUYER......................................................................24
5.1 Efforts to Close...............................................................................24
5.2 Expenses.......................................................................................24
5.3 Further Assurances.............................................................................24
5.4 Hsinchu Science Park...........................................................................24
ARTICLE VI CONDITIONS TO THE OBLIGATIONS OF SELLING STOCKHOLDERS.................................................25
6.1 Representations and Warranties.................................................................25
6.2 Compliance with Covenants......................................................................25
6.3 Corporate Action...............................................................................25
6.4 Litigation.....................................................................................25
6.5 Absence of Adverse Governmental Action.........................................................25
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6.6 Filings; Consents; Waiting Periods.............................................................25
6.7 Approval of Documentation......................................................................25
ARTICLE VII CONDITIONS TO THE OBLIGATIONS OF BUYER...............................................................26
7.1 Representations and Warranties.................................................................26
7.2 Compliance with Covenants......................................................................26
7.3 Corporate Action...............................................................................26
7.4 Litigation.....................................................................................26
7.5 Absence of Adverse Governmental Action.........................................................26
7.6 Filings; Consents; Waiting Periods.............................................................26
7.7 Approval of Documentation......................................................................27
7.8 No Material Adverse Changes....................................................................27
7.9 Board of Directors.............................................................................27
7.10 Lessor Certificates............................................................................27
7.11 Continuation of Services.......................................................................27
7.12 Consents or Waivers of Lessors.................................................................27
7.13 Fairness Opinion...............................................................................27
7.14 Wafer Purchase Agreement.......................................................................27
7.15 Extension of Lease.............................................................................27
7.16 Purchase of Additional Shares..................................................................27
7.17 Conduct of Business; Cooperation; Hsinchu Science Park.........................................27
ARTICLE VIII INDEMNIFICATION.....................................................................................28
8.1 Survival.......................................................................................28
8.2 Selling Stockholders' Obligation to Indemnify..................................................28
8.3 Buyer's Obligation to Indemnify................................................................28
8.4 Notice of Asserted Liability...................................................................28
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8.5 Opportunity to Defend..........................................................................29
8.6 Tax Adjustment.................................................................................29
8.7 Waiver of Subrogation and Other Rights.........................................................29
8.8 No Contribution................................................................................29
8.9 Non-Exclusive Remedy...........................................................................30
ARTICLE IX TAX MATTERS...........................................................................................30
9.1 Clearance Certificates.........................................................................30
9.2 Transfer Taxes.................................................................................30
9.3 LSC's Tax Indemnity............................................................................30
ARTICLE X TERMINATION OF AGREEMENT...............................................................................30
10.1 Termination....................................................................................30
10.2 Survival.......................................................................................32
10.3 Return of Materials............................................................................32
ARTICLE XI MISCELLANEOUS.........................................................................................32
11.1 Notices........................................................................................32
11.2 Entire Agreement...............................................................................33
11.3 Waivers and Amendments.........................................................................33
11.4 Governing Law..................................................................................34
11.5 Arbitration....................................................................................34
11.6 Reference to New Taiwan Dollars................................................................34
11.7 Binding Effect; Assignment.....................................................................34
11.8 No Third Party Beneficiaries...................................................................35
11.9 Counterparts...................................................................................35
11.10 Schedules and Exhibits.........................................................................35
11.11 Headings, Gender and Person....................................................................35
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11.12 Publicity......................................................................................35
11.13 Severability...................................................................................35
11.14 Time of Essence................................................................................35
11.15 Attorneys' Fees................................................................................35
11.16 Confidential Information.......................................................................36
11.17 No Publicity; Employee Letters.................................................................36
11.18 Mutual Drafting................................................................................36
11.19 Further Assurances.............................................................................36
11.20 Covenant ......................................................................................36
11.21 Actions of Selling Stockholders................................................................37
ARTICLE XII DEFINITIONS..........................................................................................37
12.1 Defined Terms..................................................................................37
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EXHIBIT INDEX
Exhibit A - Form of Estoppel Certificate
Exhibit B - Retention Agreement
Exhibit C - Wafer Purchase Agreement
SCHEDULE INDEX
Schedule 1.1 - Shareholdings
Schedule 2.1 - Foreign Jurisdictions
Schedule 2.2 - Outstanding Securities
Schedule 2.5 - Foreign Jurisdictions
Schedule 2.7 - Approvals
Schedule 2.8 - Company Financial Statements
Schedule 2.10 - Absence of Certain Changes
Schedule 2.11 - Tax Returns and Payments
Schedule 2.12 - Compliance with Laws
Schedule 2.13 - Contracts and Other Agreements
Schedule 2.14 - Real Estate
Schedule 2.15 - Environmental Matters
Schedule 2.16 - Intangible Property and Computer Software
Schedule 2.17 - Title to Properties
Schedule 2.18 - Permits
Schedule 2.20 - Employee Benefit Plans
Schedule 2.21 - Litigation
Schedule 2.22 - Insurance
Schedule 2.23 - Officers, Directors and Key Employees
Schedule 2.25 - Bank Accounts
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Schedule 2.26 - Powers of Attorney and Guarantees
Schedule 2.28 - Relations with Customers
Schedule 2.29 - Accounts Receivable
Schedule 2.30 - Transactions with Affiliates
Schedule 2.33 - Products
Schedule 3.3 - Approvals
Schedule 4.8 - Expenses
Note
All schedules have been omitted in reliance upon Item 601(b)(2) of Regulation
S-K. Diodes Incorporated agrees to furnish the SEC, supplementally, with a copy
of any omitted schedule upon request.
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made and effective as
of December 20, 2005, by and among DII Taiwan Corporation Ltd., a Taiwan
corporation ("Buyer"), Lite-On Semiconductor Corporation, a Taiwan corporation
("LSC"), Shin Sheng Investment Limited ("SSIL"), Sun Shining Investment Corp.
("SSIC") (LSC, SSIL and SSIC individually, a "Selling Stockholder" and
collectively, "Selling Stockholders"), and (with respect only to Articles IV,
VII, IX, X and XI) Anachip Corporation, a Taiwan corporation ("Company"). Buyer,
Selling Stockholders and Company are referred to collectively as the "parties."
RECITALS
A. Selling Stockholders are the beneficial and record owners of 40,470,212
of the 50,000,000 issued and outstanding shares of the capital stock of Company
(collectively, the "Shares").
B. Selling Stockholders wish to sell to Buyer, and Buyer wishes to
purchase from Selling Stockholders, the Shares in accordance with the terms and
conditions set forth in this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants and promises set
forth in this Agreement, and for other good and valuable consideration the
receipt of which is hereby acknowledged, and subject to the terms and conditions
stated herein, Buyer, Selling Stockholders and Company hereby agree as follows:
ARTICLE I
PURCHASE AND SALE OF SHARES
1.1 Purchase and Sale of Shares. Subject to the terms and conditions
hereinafter set forth, on the Closing Date, each Selling Stockholder shall sell
to Buyer, and Buyer shall purchase from each Selling Stockholder, the number of
Shares set forth opposite the respective name of such Selling Stockholder on
Schedule 1.1 hereto.
1.2 Purchase Price. As full payment for the Shares and for the agreements
and indemnities contained herein of Selling Stockholders, Buyer shall pay to
Selling Stockholders NT$20.00 per Share (the "Purchase Price"). The Purchase
Price shall be paid in two installments as set forth in Section 1.3 below.
1.3 Payment of Purchase Price.
(a) The first installment of the Purchase Price in the aggregate
amount of NT$728,463,816 shall be paid in cash in New Taiwan dollars on the
Closing Date by wire transfer of immediately available funds to such accounts as
each Selling Stockholder shall specify in writing not less than three (3)
business days before the Closing Date. The first installment of the Purchase
Price shall be allocated among Selling Stockholders in proportion to the number
of Shares to be sold by each as set forth in Schedule 1.1 hereto.
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(b) The second installment of the Purchase Price in the aggregate
amount of NT$80,940,424 (the "Holdback Amount") shall be paid in cash in New
Taiwan dollars on December 31, 2006 by wire transfer of immediately available
funds to such accounts as Selling Stockholders shall specify in writing on or
before December 15, 2006. The Holdback Amount shall be allocated among Selling
Stockholders in proportion to the number of Shares to be sold by each as set
forth on Schedule 1.1 hereto. Buyer shall have the right to set off against the
Holdback Amount the amount of any claim pursuant to Articles VIII or IX.
1.4 Closing
(a) The transfer of the Shares and the payment of the Purchase Price
(less the Holdback Amount) shall be effected on the Closing Date. At the
Closing, Selling Stockholders shall deliver to Buyer certificates evidencing the
Shares to be sold by them on such date as set forth on Schedule 1.1 hereto, duly
and properly chopped and endorsed for transfer to Buyer, and any other completed
and executed documentation necessary to effect the transfer of such Shares to
Buyer, and, concurrently with such delivery, Buyer shall pay the Purchase Price
(less the Holdback Amount) in accordance with Section 1.3. In addition, at the
Closing Date, all other actions shall be taken, and all other documents shall be
duly executed and delivered, which are necessary to consummate all other
transactions contemplated by this Agreement, other than such actions and
documents as are to be taken or delivered at another date as specifically
provided in this Agreement. The Closing shall take place at the offices of
Company.
(b) It is the understanding and intent of the parties that any net
profit of Company earned during the period commencing on January 1, 2006 and
ending on the Closing Date shall be allocated solely to Buyer and the Selling
Stockholders shall have no interest therein.
1.5 Closing Deadline. The Closing Date shall occur on the latter to occur
of (i) five (5) business days following the date upon which the conditions set
forth in Articles VI and VII have been satisfied or (ii) January 10, 2006, or
such earlier or later date as may be mutually agreed to in writing by Buyer and
Selling Stockholders (such date being referred to herein as the "Closing Date"
or the "Closing"), but in no event later than March 31, 2006, unless both Buyer
and Selling Stockholders consent in writing to an extension beyond such date.
Buyer, Selling Stockholders and Company agree to use commercially reasonable
efforts to satisfy the conditions set forth in this Agreement, and to cause the
Closing to occur within the specified time period.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLING STOCKHOLDERS
Selling Stockholders, jointly and severally, hereby represent and warrant
to Buyer that the statements contained in this Article II are correct and
complete as of the date of this Agreement and will be correct and complete as of
the Closing Date (as though made then and as though the Closing Date were
substituted for the date of this Agreement throughout this Article II):
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2.1 Due Formation. Company is a company limited by shares duly organized
and validly existing under the laws of Taiwan, has the requisite power to own,
lease and operate its assets, properties and business and to carry on its
business as now being conducted and is duly qualified as a foreign corporation
in good standing under the laws of each state or jurisdiction in which either
the ownership or use of the properties owned or used by it, or the nature of the
activities conducted by it, requires such qualification. Company is qualified as
a foreign corporation under the laws of each state or jurisdiction set forth in
Schedule 2.1.
2.2 Shares. The authorized capital stock of Company consists of 64,000,000
shares, par value NT$10 per share, of which 50,000,000 are issued and
outstanding as of the date hereof and as of the Closing Date. All outstanding
shares of Company's capital stock have been duly authorized, validly issued,
fully paid and non-assessable. Except as set forth in Schedule 2.2, there are no
outstanding (i) shares of capital stock or other securities of Company other
than the Shares, (ii) options, warrants or other securities of the Company
convertible into or exchangeable for shares of capital stock or other securities
or ownership interests in the Company, or (iii) contracts, commitments,
understandings, arrangements, restrictions or rights by which Company may be
obligated to issue any shares of the capital stock or other securities of
Company. Company has no outstanding bonds, debentures, notes or other
obligations the holders of which have the right to vote (or are convertible into
or exercisable for securities having the right to vote) with the stockholders of
Company on any matter.
2.3 Title to Shares. All of the Shares are held of record and owned
beneficially by Selling Stockholders free and clear of all liens, encumbrances,
security interests, equities, options, claims, charges and restrictions, and,
upon delivery of the Purchase Price on the Closing Date as herein provided,
Buyer will acquire good and transferable title to the Shares, free and clear of
any lien, claim or other encumbrance.
2.4 Articles of Incorporation. Company has heretofore delivered to Buyer
true and complete copies of the Articles of Incorporation (certified by Dr.
Yea-Fu Tsao, the President of the Company) as in effect on the date hereof. The
board and shareholder resolutions of Company in the form heretofore delivered
completely and accurately reflects all actions taken by the Board of Directors
or the stockholders of Company on or before the date hereof.
2.5 Subsidiaries. Each direct and indirect Subsidiary of Company is duly
organized, validly existing and in good standing under the laws of its
jurisdiction of formation and has the requisite power and authority to own,
lease and operate its assets and properties and to carry on its business as it
is now being conducted. The Subsidiaries are duly qualified as corporations in
good standing under the laws of each state or jurisdiction in which either the
ownership or use of the properties owned or used by it, or the nature of the
activities conducted by it, requires such qualification. Each Subsidiary is
qualified as a foreign corporation under the laws of each state or jurisdiction
set forth on Schedule 2.5. All of the outstanding equity securities of each
Subsidiary are validly issued, fully paid, nonassessable and free of preemptive
rights and are owned directly or indirectly by Company free and clear of any
liens, encumbrances, security interests, equities, options, claims, charges or
restrictions of any nature whatsoever. There are no subscriptions, options,
warrants, rights, calls, contracts, voting trusts, proxies or other commitments,
understandings, restrictions or arrangements relating to the issuance, sale,
voting, transfer, ownership or other rights with respect to any equity
securities of any Subsidiary, including any right of conversion or exchange
under any outstanding security, instrument or agreement.
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2.6 Authority. Each Selling Stockholder and Company has all requisite
corporate power and authority to execute and deliver this Agreement and each
Transaction Document and to perform its obligations hereunder and thereunder.
This Agreement has been, and each Transaction Document will be prior to the
Closing, duly authorized, executed and delivered by each Selling Stockholder (or
its duly appointed attorney-in-fact or representative) or Company, and (assuming
the due authorization, execution and delivery by Buyer) this Agreement
constitutes, and each Transaction Document when so executed and delivered will
constitute, the legal, valid and binding obligations of each Selling Stockholder
and Company enforceable against each Selling Stockholder and Company in
accordance with its terms.
2.7 No Violation of Law and Agreements. Except as set forth in Schedule
2.7, the execution and delivery by each Selling Stockholder or Company of this
Agreement and each Transaction Document, and the performance by each Selling
Stockholder or Company of its obligations hereunder or thereunder, does not and
will not:
(a) violate any provision of the Articles of Incorporation of such
Selling Stockholder or Company;
(b) violate any provision of Applicable Law relating to such Selling
Stockholder or Company; violate any provision of any order, arbitration award,
judgment or decree to which such Selling Stockholder or Company is subject; or
require a registration, filing, application, notice, consent, approval, order,
qualification or waiver with, to or from any Governmental Authority; or
(c) require a consent, approval or waiver from, or notice to, any
party to any contract to which such Selling Stockholder, Company or any
Affiliate thereof is a party; or result in a breach of or cause a default under
any provision of a contract to which such Selling Stockholder, Company or any
Affiliate thereof is a party.
2.8 Financial Statements.
(a) Schedule 2.8(a) contains true and complete copies of the
consolidated financial statements of Company (the "Company Financial
Statements") consisting of (i) the unaudited balance sheet of Company at October
31, 2005 (the "Recent Balance Sheet") and (ii) the unaudited statements of
income and cash flows for the ten months then ended (including the notes and
schedules contained therein or annexed thereto). All Company Financial
Statements (including all notes and schedules contained therein or annexed
thereto) have been prepared in accordance with GAAP consistently applied and
with the books and records of Company, and fairly present the assets,
liabilities and financial position, the results of operations and cash flows of
Company on a consolidated basis as of the dates and for the years and periods
indicated.
-4-
(b) Company and each Subsidiary maintains accurate books and records
reflecting its assets and liabilities and Company maintains proper and adequate
internal accounting controls which provide assurance that (i) transactions are
executed with management's authorization; (ii) transactions are recorded as
necessary to permit preparation of the consolidated financial statements of
Company and to maintain accountability for Company's consolidated assets; (iii)
access to Company's assets is permitted only in accordance with management's
authorization; (iv) the reporting of Company's assets is compared with existing
assets at regular intervals; and (v) accounts, notes and other receivables and
inventory are recorded accurately, and proper and adequate procedures are
implemented to effect the collection thereof on a current and timely basis.
(c) There are no (i) significant deficiencies or material weaknesses
in the design or operation of internal controls over financial reporting which
are reasonably likely to adversely affect Company's ability to record, process,
summarize and report financial data or (ii) any fraud, whether or not material,
that involves management or other employees who have a significant role in
Company's internal controls. Neither Company nor any Subsidiary nor, to
Company's knowledge, any director, officer, employee, auditor, accountant or
representative of Company or any Subsidiary has received or otherwise had or
obtained knowledge of any material complaint, allegation, assertion or claim,
whether written or oral, regarding the accounting or auditing practices,
procedures, methodologies or methods of Company or any Subsidiary or their
respective internal accounting controls, including any material complaint,
allegation, assertion or claim that Company or any Subsidiary has engaged in
questionable accounting or auditing practices.
2.9 No Undisclosed Liabilities. Neither Company nor any Subsidiary has any
Liabilities, except (i) Liabilities the amounts of which are disclosed or
reserved against on the Recent Balance Sheet and (ii) Liabilities incurred, in
connection with Company's continuing businesses, in the ordinary course of
business and consistent with past practice since the date of the Recent Balance
Sheet.
2.10 Absence of Certain Changes.
(a) Except as set forth in Schedule 2.10, since the date of the
Recent Balance Sheet, neither Company nor any Subsidiary has:
(i) entered into any transaction, contract or commitment or
incurred any obligation or liability (fixed or contingent) which is not a
business transaction, contract, commitment or obligation entered into or
incurred in the ordinary course of business;
(ii) waived or released any rights of material value, other
than in the ordinary course of business;
(iii) accelerated receivables, delayed payables or liquidated
inventory, except in accordance with prior practices;
-5-
(iv) transferred or granted any rights under any concessions,
leases, licenses, agreements, patents, inventions, trade names, trademarks,
service marks, brand marks, brand names or copyrights, or registrations or
licenses thereof or applications therefor, or with respect to any know-how or
other proprietary or trade rights;
(v) made or granted any wage or salary increase (except for
increases made in accordance with established compensation policies of Company
or such Subsidiary applied on a basis consistent with previous practice),
granted or accrued any bonus, entered into any employment contract with any
officer or employee or made any loan (excluding advances for normal reimbursable
business expenses) to, or entered into any transaction of any other nature with,
any officer or director of Company or any Subsidiary;
(vi) suffered any adverse change in the financial condition or
results of operations of Company and the Subsidiaries, or in their assets,
properties, business, operations or prospects, considered as a whole;
(vii)issued, sold or otherwise disposed of any securities of
Company or of the Subsidiaries (including any options, warrants or rights to
purchase any securities of Company or the Subsidiaries) or, except in the
ordinary course of business, any evidence of indebtedness of Company or of the
Subsidiaries;
(viii) made any changes in accounting methods or practices;
(ix) committed to make any capital expenditures in excess of
NT$60,000; or
(x) entered into any agreement to do any of the things
described in this section.
(b) Since the date of the Recent Balance Sheet, each of Company and
the Subsidiaries has operated its business in the ordinary course consistent
with its past practice so as to preserve such business intact, to keep available
to it the services of its employees, and to preserve its business and the
goodwill of its suppliers, customers, distributors and others having business
relations with it.
2.11 Tax Returns and Payments.
(a) Company has filed its Income Tax Returns on a separate basis.
Except for the corporations and entities identified on Schedule 2.11, no other
corporation or entity other than Company was or is includible in such Tax
Returns. Neither Company nor any Subsidiary is a party to any Tax allocation or
sharing agreement, other than any such agreement of which a complete, true and
accurate copy is included in Schedule 2.11. Each Income Tax Return and other
federal, foreign, state, county and local Tax Return which is required to have
been filed with respect to the operations, income or assets of Company or any
Subsidiary has been filed by or on behalf of Company or such Subsidiary and is
complete and correct, and all Taxes which have become due pursuant or with
respect thereto or as reflected thereon, have been paid. Except as set forth on
Schedule 2.11, neither Company nor any Subsidiary is subject to Tax in any
state, local or foreign jurisdiction other than Taiwan (the Republic of China)
and/or its respective jurisdiction of incorporation; and Schedule 2.11, lists
all federal, state, local and foreign income Tax Returns filed by or on behalf
of Company or any Subsidiary for taxable periods ended after December 31, 2001,
indicates those Tax Returns that have been examined or audited and indicates
those Tax Returns that currently are the subject of examination or audit.
Company has delivered to Buyer correct and complete copies of all Income Tax
Returns filed by or on behalf of Company or any Subsidiary for each taxable
period ended since December 31, 2001 (and, if applicable, for any prior taxable
period which remains the subject of examination, audit, assessment or dispute or
for which the statute of limitations for assessment has been extended and
remains open), and all examination reports received and statements of
deficiencies assessed against or agreed to by Company or any Subsidiary at any
time.
-6-
(b) Except as set forth on Schedule 2.11:
(i) No extension or waiver of any statute of limitations has
been requested of or granted by Company or any Subsidiary with respect to any
Tax for any period, and no extension or waiver of time within which to file any
Tax Return has been requested by or granted to Company or any Subsidiary.
(ii) No deficiency, delinquency or default for any Taxes
relating to Company or any Subsidiary or its receipts, income, sales,
transactions or other business activities has been claimed, proposed or assessed
against Company or any Subsidiary nor has Company nor any Subsidiary received
notice of any such deficiency, delinquency, or default; and there is no audit,
examination, investigation, claim, assessment, action, suit, proceeding, lien or
encumbrance in effect, pending or proposed by any tax authority with respect to
any such Taxes or with respect to any Tax Return of Company or any Subsidiary.
No claim has been made by an authority in any state, local or foreign
jurisdiction other than Taiwan that Company or any Subsidiary is subject to
taxation by that jurisdiction.
(iii)Company and each Subsidiary has withheld and paid all
Taxes required to have been withheld and paid in connection with amounts paid or
owing to any employee, independent contractor, creditor, stockholder or third
party.
(iv) There is no tax ruling (received pursuant to the request
of Company or any Subsidiary), request for ruling by Company or any Subsidiary,
or settlement, compromise, closing or Tax collection agreement in effect or
pending which does or could affect the liability of Company or any Subsidiary
for Taxes for any period after the Closing Date.
2.12 Compliance with Laws. Except as set forth in Schedule 2.12, neither
Company nor any Subsidiary has violated, and each is in compliance with, all
laws, statutes, ordinances, regulations, rules and orders of any foreign,
federal, state or local government and any other governmental department or
agency, and any judgment, decision, decree or order of any court or governmental
agency, department or authority. No Selling Stockholder nor Company nor any
Subsidiary has received any notice to the effect that, or otherwise been advised
that, it is not in compliance with any such statutes, regulations, rules,
judgments, decrees, orders, ordinances or other laws, and no Selling Stockholder
nor Company nor any Subsidiary is aware of any existing circumstances which
could result in violations of any of the foregoing.
-7-
2.13 Contracts and Other Agreements.
(a) Schedule 2.13 sets forth as of the date of this Agreement all of
the contracts and other agreements hereinafter referred to in this Section 2.13,
to which Company or any Subsidiary is a party or by or to which it or its assets
or properties are bound or subject (collectively, the "Contracts"):
(i) written contracts and other agreements with any current or
former officer, director, employee, consultant, agent or other representative
having more than six (6) months to run from the date hereof or providing for an
obligation to pay or accrue compensation of US$25,000 or more per annum, or
providing for the payment of fees or other consideration in excess of US$25,000;
(ii) contracts and other agreements with any labor union or
association representing any employee;
(iii)contracts and other agreements other than in the ordinary
course of business and for the purchase or sale of equipment, inventory
(involving a purchase or sale price exceeding US$5,000) or services (involving a
purchase or sale price exceeding US$5,000) that contain an escalation,
renegotiation or redetermination clause or that cannot be canceled without
liability, premium or penalty on thirty (30) or fewer days notice;
(iv) contracts and other agreements for the sale of any of the
assets or properties of Company or any Subsidiary other than in the ordinary
course of business and for a sale price exceeding US$50,000 in any one case (or
in the aggregate, in the case of any series of related contracts or other
agreements) or for the grant to any person of any preferential rights to
purchase any of its assets or properties;
(v) contracts and other agreements (including, without
limitation, leases of real property) calling for an aggregate purchase price or
payments in any one year of more than US$50,000 in any one case (or in the
aggregate, in the case of any series of related contracts or other agreements);
(vi) partnership, joint venture or similar agreements;
(vii) contracts or other agreements under which Company or a
Subsidiary or a third party agrees to indemnify any party other than in the
ordinary course of business;
(viii) contracts and other agreements containing covenants of
Company or any Subsidiary not to compete in any line of business or with any
person in any geographical area or covenants of any other person not to compete
with Company or any Subsidiary in any line of business or in any geographical
area;
-8-
(ix) contracts and other agreements relating to the making of
any loan by Company or any Subsidiary;
(x) contracts or other agreements relating to the borrowing of
money by Company or any Subsidiary or the direct or indirect guaranty of, or
agreement to repay, by Company or any Subsidiary any obligation by the borrowing
entity for the repayment of borrowed money, or the deferred payment of the
purchase price of any asset, or any other contingent obligations in respect of
indebtedness of any other person or governmental or regulatory body;
(xi) contracts or other agreements for or relating to
computers, computer equipment, computer software or computer services in excess
of US$25,000;
(xii) contracts or other agreements between Company or any
Subsidiary and any federal, state, local or foreign government, agency or
authority;
(xiii) any contract with any Affiliate of Company relating to
the provision of goods or services by or to Company; and
(xiv) any other contract that is material to the business of
Company.
(b) All of the contracts listed or required to be listed in Schedule
2.13 are valid, binding and full force and effect; Company has not been notified
by any party thereto of such party's intention or desire to terminate or modify
any such contract in any respect and neither Company nor any other party thereto
is in breach of any of the terms or covenants of any such contract.
(c) There have been delivered or made available to Buyer true and
complete copies of all of the contracts and other agreements set forth in
Schedule 2.13 or on any other Schedule. Neither Company nor any Subsidiary has
been found to be in default under any such contract or agreement, nor will the
consummation of the transactions contemplated by this Agreement result in a
default under any such contract or agreement or the right to terminate such
contract or agreement.
2.14 Real Estate.
(a) Schedule 2.14 contains a complete and accurate list of the
following:
(i) all real property and interests in real property and the
buildings, structures and improvements thereon (the "Owned Property") owned by
Company or a Subsidiary, or which Company or a Subsidiary is contractually
obligated to purchase;
-9-
(ii) all leases (the "Leases") of real property and interests
in real property and the buildings, structures and improvements thereon (the
"Leased Property") pursuant to which Company or a Subsidiary is the lessee;
(iii) all contracts or options (and all amendments, extensions
and modifications thereto) held by Company or a Subsidiary, or contractual
obligations (and all amendments, extensions and modifications thereto) on the
part of Company or a Subsidiary to purchase or acquire any interest in real
property;
(iv) all contracts or options (and all amendments, extensions
and modifications thereto) granted by Company or a Subsidiary, or contractual
obligations (and all amendments, extensions and modifications thereto) on the
part of Company or a Subsidiary to sell or dispose of any interest in real
property; and
(v) all policies of title insurance issued to Company or a
Subsidiary with respect to the Facilities.
(b) The Facilities are sufficient for the conduct of the business of
Company and the Subsidiaries as such business is now conducted. Except as set
forth in Schedule 2.14, Company or a Subsidiary has the right under valid and
existing leases or other agreements to occupy and use all Leased Property which
it uses in the conduct of their business. Neither the whole nor any portion of
the Facilities has been condemned, requisitioned or otherwise taken by any
Governmental Authority, and neither Company nor a Subsidiary has received any
notice that any such condemnation, requisition or taking is threatened, which
condemnation, requisition or taking would preclude or impair the current use
thereof. All buildings, structures and appurtenances comprising part of the
Facilities which are currently being used in the conduct of the business of
Company or any Subsidiary are in good condition and have been reasonably
maintained, normal wear and tear excepted. All Facilities have received all
required approvals of Governmental Authorities (including, without limitation,
permits and a certificate of occupancy or other similar certificate permitting
lawful occupancy of the Facilities) required in connection with the operation
thereof and have been operated and maintained in accordance with applicable
laws, rules and regulations. All Facilities are supplied with utilities
(including, without limitation, water, sewage, disposal, electricity, gas and
telephone) and other services necessary for the operation of such Facilities as
currently operated. The improvements constructed on the Facilities, including,
without limitation, all Leasehold Improvements, and all fixtures and equipment
and other tangible assets owned, leased or used by Company or a Subsidiary at
the Facilities are (i) insured to the extent and in a manner customary in the
industry, (ii) structurally sound with no known defects, (iii) in good operating
condition and repair, subject to ordinary wear and tear, (iv) not in need of
maintenance or repair except for ordinary routine maintenance and repair, the
cost of which would not be material, (v) sufficient for the operation of
Company's and the Subsidiaries' businesses as presently conducted and (vi) in
conformity with all applicable laws, ordinances, orders, regulations and other
requirements relating thereto currently in effect.
-10-
(c) Company has good and marketable title to the Owned Property,
subject to no mortgage, pledge, lien, security interest, conditional sale
agreement, encumbrance or charge, and there are no encroachments by Company or a
Subsidiary on abutting property and no encroachments by others on their
properties, except: as reflected in the Recent Balance Sheet; tax, materialmen's
or like liens for obligations not yet due or payable or being contested in good
faith by appropriate proceedings described in Schedule 2.14; such imperfections
of title and encumbrances which do not detract from the value thereof for the
conduct of the business conducted there, or interfere with the use thereof for
the conduct of the business conducted there; zoning and building ordinances,
recorded building use and other restrictions and easements and quasi-easements
of record, licenses, covenants, rights-of-way and other similar restrictions,
which do not interfere with the use thereof for the conduct of the business
conducted there; and mortgages, deeds of trust or other claims and encumbrances,
as set forth in Schedule 2.14. Except as set forth in Schedule 2.14, neither
Company nor a Subsidiary nor any Selling Stockholder has received any written
notice that Company or a Subsidiary is in violation of any zoning, use,
occupancy, building, or environmental regulation, ordinance or other law, order,
regulation or requirement relating to the Facilities, including, without
limitation, Environmental Laws.
(d) Except as set forth in Schedule 2.14, each Lease is in full
force and effect, neither Company nor a Subsidiary is in default of its
obligations under any Lease, and no Lease is subject to or encumbered by any
lien or other restriction which impairs the use of the property to which it
relates in the business of Company or a Subsidiary as now conducted.
2.15 Environmental Matters. Except as set forth on Schedule 2.15:
(a) For purposes of this Section, the term "Company" shall include
(i) all Affiliates of Company (except any Person who is an Affiliate of Company
solely as a result of the ownership of Shares by LSC), (ii) all partnerships,
joint ventures and other entities or organizations in which Company or a
Subsidiary was at any time or is a partner, joint venturer, member or
participant and (iii) all predecessor or former corporations, partnerships,
joint ventures, organizations, businesses or other entities, whether in
existence as of the date hereof or at any time prior to the date hereof, the
assets or obligations of which have been acquired or assumed by Company or a
Subsidiary or to which Company or a Subsidiary has succeeded.
(b) The Facilities have been maintained in compliance with all
applicable laws, statutes, ordinances, regulations, rules, judgments, orders,
notice requirements, court decisions, agency guidelines or principles of law,
restrictions and licenses, which (i) regulate or relate to the protection or
clean-up of the environment; the use, treatment, storage, transportation,
handling, disposal or Release of Hazardous Substances; the preservation or
protection of waterways, groundwater, drinking water, air, wildlife, plants or
other natural resources; or the health and safety of persons or property,
including, without limitation, protection of the health and safety of employees;
or (ii) impose liability with respect to any of the foregoing, including,
without limitation, the Air Pollution Control and Emissions Criteria for the
Semiconductor Manufacturing Industry (ILLEGIBLE), the Waste Disposal Act
(ILLEGIBLE), or any other similar applicable law of similar effect, each as
amended. (All of the above, collectively, are referred to herein as the
"Environmental Laws").
-11-
(c) The Facilities are, and at all times have been, and all Former
Facilities were at all times when owned, leased or operated by Company or a
Subsidiary, owned, leased and operated in compliance with all Environmental Laws
and in a manner that will not give rise to any liability under any Environmental
Laws.
(d) Company has, and at all times has had, all Permits required
under any Environmental Law and each Facility is, and at all times has been, in
compliance with all such Permits.
(e) The consummation of any of the transactions contemplated by this
Agreement will not require an application for issuance, renewal, transfer or
extension of, or any other administrative action regarding, any Permit required
under any Environmental Law.
(f) Neither Company nor a Subsidiary has received any notice at any
time that it is or was claimed to be in violation of or in non-compliance with
the conditions of any Permit required under any Environmental Law or the
provisions of any Environmental Law.
(g) There is not now pending or threatened, nor any basis for, nor
has there ever been, any Action against Company or a Subsidiary under any
Environmental Law or otherwise with respect to any Release or mishandling of any
Hazardous Substance.
(h) There are no consent decrees, judgments, judicial or
administrative orders or agreements with, or liens by, any governmental
authority or quasi-governmental entity relating to any Environmental Law which
regulate, obligate, bind or in any way affect Company or a Subsidiary or any
Facility or Former Facility.
(i) There is not and has not been any Hazardous Substance used,
generated, treated, stored, transported, disposed of, handled or otherwise
existing on, under, about or from any Facility or any Former Facility, except
for quantities of any such Hazardous Substances stored or otherwise held on,
under or about any such Facility in full compliance with all Environmental Laws
and necessary for the operation of the business conducted there.
(j) Company has at all times used, generated, treated, stored,
transported, disposed of or otherwise handled its Hazardous Substances in
compliance with all Environmental Laws and in a manner that will not result in
liability of Company or a Subsidiary under any Environmental Law.
(k) There are no present or past Environmental Conditions in any way
relating to Company or a Subsidiary, or the Facilities. "Environmental
Conditions" means the introduction into the environment of any pollution,
including, without limitation, any contaminant, irritant or pollutant or other
Hazardous Substance (whether or not upon the Facilities or other property of
Company or a Subsidiary and whether or not such pollution constituted at the
time thereof a violation of any Environmental Law as a result of any Release of
any kind whatsoever of any Hazardous Substance) as a result of which Company or
a Subsidiary has or may become liable to any person or by reason of which the
Facilities may suffer or be subjected to any lien.
-12-
(l) No current or past use, generation, treatment, transportation,
storage, disposal or handling practice of Company or a Subsidiary with respect
to any Hazardous Substance has or will result in any liability under the Air
Pollution Control and Emissions Criteria for the Semiconductor Manufacturing
Industry (ILLEGIBLE), the Waste Disposal Act (ILLEGIBLE) or any applicable law
of similar effect.
(m) There is not now and has not been at any time in the past any
underground or above-ground storage tank or pipeline at any Facility or Former
Facility where the installation, use, maintenance, repair, testing, closure or
removal of such tank or pipeline was not in compliance with all Environmental
Laws, and there has been no Release from or rupture of any such tank or
pipeline, including, without limitation, any Release from or in connection with
the filling or emptying of such tank.
(n) True, complete and correct copies of the written reports, and
all parts thereof, including any drafts of such reports if such drafts are in
the possession or control of Company or a Subsidiary, of all environmental
audits or assessments which have been conducted at any Facility or Former
Facility within the past five years, either by Company or a Subsidiary or any
attorney, environmental consultant or engineer engaged for such purpose, have
been delivered to Buyer and a list of all such reports, audits and assessments
and any other similar report, audit or assessment of which Company or a
Subsidiary or any Selling Stockholder has knowledge is included on Schedule
2.15.
(o) Company does not manufacture or distribute any product which
requires any warning mandated by Applicable Law.
(p) Company is not a party, whether as a direct signatory or as
successor, assign or third party beneficiary, or otherwise bound, to any Lease
or other Contract (excluding insurance policies disclosed on Schedule 2.22)
under which Company or a Subsidiary is obligated by or entitled to the benefits
of, directly or indirectly, any representation, warranty, indemnification,
covenant, restriction or other undertaking concerning environmental conditions.
(q) Company has not released any other person from any claim under
any Environmental Law or waived any rights concerning any Environmental
Condition.
(r) Company has given all notices and warnings, made all reports,
and has kept and maintained all records required by and in compliance with all
Environmental Laws.
2.16 Intellectual Property and Computer Software.
(a) Each of Company and each Subsidiary of Company has all requisite
right, title and interest in or valid and enforceable rights under contracts or
licenses to use all Company Intellectual Property, which are utilized or used in
its respective business as presently conducted. To the extent any Intellectual
Property is the subject of a licensing agreement, such licensing agreement and
the parties thereto are described in Schedule 2.16. Except as described in
Schedule 2.16, neither Company nor any Subsidiary of Company has received notice
that it is infringing upon or otherwise misappropriating any rights relating to
the Intellectual Property of any third party or any application pending for the
Intellectual Property of any third party, and neither Company nor any of its
Subsidiaries has knowledge of any basis for any such claim of infringement or
misappropriation.
-13-
(b) Each item of Company Intellectual Property is owned exclusively
by the Company or its Subsidiaries (excluding Intellectual Property licensed to
Company or such Subsidiaries) and is free and clear of any Liens. Company (i)
owns exclusively all trademarks, service marks and trade names used by Company
in connection with the operation or conduct of the business of Company,
including the sale of any products or technology or the provision of any
services by Company (including, but not limited to, the Products) and (ii) owns
exclusively, and has good title to, all copyrighted works that are Company
products or other works of authorship that Company otherwise purports to own
(including, but not limited to, the Products); provided, however, that such
works may incorporate copyrighted works or works of authorship, trademarks or
trade names of third parties which are licensed to Company or are in the public
domain. Each Subsidiary of Company (i) owns exclusively all trademarks, service
marks and trade names used by such Subsidiary in connection with the operation
or conduct of the business of such Subsidiary, including the sale of any
products or technology or the provision of any services by such Subsidiary
(including, but not limited to, the Products) and (ii) owns exclusively, and has
good title to, all copyrighted works that are such Subsidiary's products or
other works of authorship that the Subsidiary otherwise purports to own
(including, but not limited to, the Products); provided, however, that such
works may incorporate copyrighted works or works of authorship, trademarks or
trade names of third parties which are licensed to the Subsidiary or are in the
public domain.
(c) To the extent that any Company Intellectual Property has been
developed or created by any party other than Company or a Subsidiary, Company
has a written agreement with such party with respect thereto and Company or
Subsidiary has either (i) obtained ownership of, and is the exclusive owner of,
all such Intellectual Property by operation of law or by valid assignment of any
such rights or (ii) has obtained a license under or to such Intellectual
Property.
(d) Company Intellectual Property constitutes all the Intellectual
Property used in the conduct of Company's and its Subsidiaries' business as it
currently is conducted, including, without limitation, the design, development,
distribution, marketing, manufacture, use, import, license, and sale of the
products, technology and services of Company (including products, technology or
services currently under development and including, but not limited to, the
Products).
(e) To the knowledge of each Selling Stockholder and Company, no
party is infringing or misappropriating any Company Intellectual Property.
(f) No Company Intellectual Property or product, technology or
service of Company or its Subsidiaries is subject to any Action that restricts,
or that is reasonably expected to restrict in any manner, the use, transfer or
licensing of any Company Intellectual Property by Company or its Subsidiaries or
that may affect the validity, use or enforceability of such Company Intellectual
Property.
-14-
(g) Company has taken all necessary and appropriate steps to protect
and preserve ownership of Company Intellectual Property. Company has secured
valid written assignments from all consultants and employees who contributed to
the creation or development of Company Intellectual Property. In the event that
the consultant is concurrently employed by Company and a third party, Company
has taken additional steps to ensure that any Company Intellectual Property
developed by such a consultant does not belong to the third party or conflict
with the third party's employment agreement. Such steps include, but are not
limited to, ensuring that all research and development work performed by such a
consultant are performed only on Company's facilities and only using Company's
resources.
2.17 Title to Properties, Absence of Liens and Encumbrances. Company and
each Subsidiary has good and marketable title to all of its properties and
assets whether real, personal, tangible or intangible, including all properties
reflected in the Recent Balance Sheet and those acquired since the date thereof
(except as since sold or otherwise disposed of in the ordinary course of
business), free and clear of all mortgages, liens, pledges, easements,
covenants, conditions, restrictions, claims and encumbrances, other than (i) as
referred to in the Recent Balance Sheet, (ii) any liens for taxes not yet
delinquent or being contested in good faith by appropriate proceedings, (iii)
the matters set forth in the Schedule 2.17, and (iv) mechanics', workman's,
repairmen's, warehousemen's, carriers' or other similar Liens arising or
incurred in the ordinary course of business. None of the assets necessary to
operate the business conducted by Company or any Subsidiary are owned by a
Selling Stockholder or an Affiliate of a Selling Stockholder (other than Company
and the Subsidiaries).
2.18 Permits. Schedule 2.18 sets forth all governmental Permits held by
Company or any Subsidiary and necessary to the operation of their respective
business. Except for Permits for which applications are shown in Schedule 2.18
to be pending, all such Permits are currently in force. No written notice of any
violation has been received in respect of any such Permit, and no proceeding is
pending that would suspend or revoke or limit any such Permit.
2.19 Labor and Employment Matters.
(a) Each of Company and the Subsidiaries: (i) has withheld and paid
to the appropriate Governmental Authorities, or are withholding for payment not
yet due to such authorities, all amounts required to be withheld from its
employees; (ii) is not liable for any arrears of wages, Taxes, penalties or
other sums for failure to comply with any of the foregoing; and (iii) has
complied in all respects with all Applicable Laws, rules and regulations
relating to the employment of labor, including, without limitation, the Labor
Standards Law, the Labor Inspection Law, the rules for the Allocation and
Management of the Workers' Retirement Reserve Funds, the Labor Pension Act, and
those relating to hours, wages, collective bargaining and the payment and
withholding of Taxes and other sums as required by appropriate authorities.
(b) (i) Neither Company nor any Subsidiaries are a party to any
collective bargaining agreement or other labor contract applicable to the
employees of Company; (ii) there has been no breach or other failure to comply
with any material provision of such agreement or contract; and (iii) neither
Company, nor any Subsidiary, is subject: (1) to any unfair labor practice
complaint pending before any federal, state, local or foreign agency, (2)
pending or threatened labor strike, slowdown, work stoppage, lockout, or other
organized labor disturbance, or threat thereof, (3) pending grievance
proceeding, representation question or arbitration proceeding arising out of or
under any collective bargaining agreement, or (4) attempt by any union to
represent employees of Company or a Subsidiary as a collective bargaining agent.
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2.20 Employee Benefits Plans.
(a) Schedule 2.20 sets forth a true and complete list of all Benefit
Plans that Company or any trade or business which is under control, or which is
treated as a single employer, with Company, participates in, or contributes to,
or has ever maintained, participated in, or contributed to.
(b) Company has delivered to Buyer true and complete copies of: (i)
all plan texts, agreements and material employee communications relating to each
Benefit Plan; (ii) all summary plan descriptions, the most recent annual report
(including all schedules thereto) and the most recent annual and periodic
accounting and financial statements of related plan assets with respect to each
Benefit Plan; (iii) any communication to or from any Governmental Authority with
respect to each Benefit Plan; and (iv) the most recent actuarial report with
respect to each Benefit Plan.
(c) No event has occurred (and there exists no condition or set of
circumstances) in connection with any Benefit Plan that could subject Company,
Buyer, or any Benefit Plan, directly or indirectly, to any liability under any
law, regulation or governmental order applicable to any Benefit Plan, including
the Rules for the Allocation and Management of the Workers' Retirement Reserve
Funds and the Labor Pension Act.
(d) Each Benefit Plan conforms to, and its administration is in
compliance with, all Applicable Laws and no fiduciary of any Benefit Plan has
taken any action that could result in such fiduciary being liable for the
payment of damages, or that could result in any liability for Company or Buyer,
under any Applicable Law. Company has complied with the Rules for the Allocation
and Management of the Workers' Retirement Reserve Funds with respect to
employees after July 1, 2005, and has properly transitioned pension withholdings
for employees to be in compliance with current law.
(e) Each Benefit Plan has been maintained in accordance with its
terms, and there are no pending or threatened claims, lawsuits or arbitrations
(other than routine claims for benefits) that have been asserted or instituted
against or with respect to any such Benefit Plan or the assets of any of the
trusts under any such Benefit Plan.
(f) There has been no failure to comply with Applicable Law as to
the filing of reports, documents and notices with any Governmental Authority
that could subject any Benefit Plan, any fiduciary thereof, Company or Buyer to
a penalty, and any requirement of the furnishing of such documents to
participants or beneficiaries, due before the Closing Date, has been or will be
complied with by all of the Benefit Plans prior to the Closing.
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(g) No Benefit Plan provides medical or death benefits (whether or
not insured) with respect to current or former employees of Company beyond their
retirement or other termination of service.
(h) There are no unfunded benefit obligations arising under any
Benefit Plan in any jurisdiction.
(i) The consummation of the transactions contemplated hereby will
not entitle any current or former employee of Company to severance pay,
unemployment compensation or any similar payment, or accelerate the time of
payment or vesting, or increase the amount of any compensation due to any such
employee or former employee.
2.21 Litigation. Except as set forth in Schedule 2.21, there is no
litigation, action, suit, proceeding or, to the best knowledge of any Selling
Stockholders or Company, investigation presently pending or threatened against
Company or a Subsidiary or affecting its assets, property, business or prospects
or restricting or prohibiting the consummation of the transactions contemplated
by this Agreement before any court or governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign.
2.22 Insurance. Schedule 2.22 sets forth a list of all policies or binders
of fire, liability, product liability, worker's compensation, vehicular and
other insurance held by or on behalf of Company and each Subsidiary. Such
policies and binders are valid and enforceable in accordance with their terms,
are in full force and effect, and insure against risks and liabilities of the
kinds and in amounts customarily insured against by persons of established
reputation engaged in the same or a similar business similarly situated. All
premiums on all such policies have been paid to date and Company has complied
with all conditions of such policies and has received no notice of any failure
to comply with the terms of such policies. In addition, Schedule 2.22 sets forth
in respect of such policies and binders (i) the type and amount of coverage
provided thereby, (ii) their respective effective dates and (iii) any claims
made or occurrences reported during the past two (2) years with respect to
products liability and workers compensation.
2.23 Officers, Directors and Key Employees. Schedule 2.23 sets forth (i)
the name and total compensation of each officer, director, supervisor and
responsible person of Company or a Subsidiary, and each other employee of
Company or a Subsidiary whose salary as of the date hereof equals or exceeds
US$60,000 per annum, and (ii) all commitments or agreements by Company or a
Subsidiary to increase the wages or to modify the conditions or terms of
employment of any such employees.
2.24 Conditions of Tangible Assets and Inventories.
(a) All items of machinery, equipment and other tangible assets of
Company and each Subsidiary are in good operational condition, have been
regularly and properly serviced and maintained in a manner that would not void
or limit the coverage of any warranty thereon, other than items currently under,
or scheduled for, repair or construction, and are adequate and fit to be used
for the purposes for which they are currently used in the manner they are
currently used.
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(b) The inventory of the Company and the Subsidiaries consist of
items of merchantable quality and quantity usable or salable in the ordinary
course of business, and are salable at prevailing market prices not less than
the book value amounts thereof minus the inventory allowance relating thereto,
and are not obsolete, damaged, slow-moving or defective, except for such items
as have been written off or written down to net realizable value on the Recent
Balance Sheet. No item included in the inventory has been the subject of recall
by a government agency. The value at which inventories are carried on the Recent
Balance Sheet reflects the customary inventory valuation policy of Company
(which fairly reflects the value of obsolete, spoiled or excess inventory) for
stating inventory in accordance with GAAP consistently applied.
2.25 Bank Accounts. Schedule 2.25 sets forth the names and locations of
all banks, trust companies, savings and loan associations and other financial
institutions at which each of Company and the Subsidiaries maintain accounts of
any nature, the account numbers of all such accounts, the names of all persons
authorized to draw thereon or make withdrawals therefrom and a specimen of the
authorized chops on file with each financial institution as the official chops
to withdraw funds.
2.26 Powers of Attorney; Guarantees. Except as set forth in Schedule 2.26,
neither Company nor any Subsidiary nor any responsible person, director,
supervisor nor officer has an obligation to act under any outstanding power of
attorney or any obligation or liability, either accrued, accruing or contingent,
as guarantor, surety, consignor, endorser (other than for purposes of collection
in the ordinary course of the business), co-maker or indemnitor in respect of
the obligation of any person, corporation, partnership, joint venture,
association, organization or other entity.
2.27 Relations with Suppliers. No supplier has canceled any contract or
order for provisions of, and there has been no threat by any supplier not to
provide, products, supplies, or services (including utilities) to Company or any
Subsidiary within the twelve (12) months immediately preceding the date of this
Agreement. Each of Company's and the Subsidiaries' relationships with its
suppliers are commercially satisfactory.
2.28 Relations with Customers. Except as set forth in Schedule 2.28, no
customer has canceled any contract or order for provisions of, and there has
been no threat by any customer not to purchase (or to reduce its purchases of),
products from Company or any Subsidiary within the twelve (12) months
immediately preceding the date of this Agreement. Each of Company's and the
Subsidiaries relationships with its customers are commercially satisfactory.
2.29 Accounts Receivables. All of the accounts receivable owing to each of
Company and the Subsidiaries as of the date of this Agreement constitute, and as
of the Closing Date will constitute, valid and enforceable claims arising from
bona fide transactions in the ordinary course of business, and there has been no
notice of any claims, refusals to pay or other claimed rights of set off against
any thereof. Except as set forth in Schedule 2.29, (i) no third party account
debtor is delinquent in its payment in the aggregate more than US$10,000 by more
than sixty (60) days; (ii) no account debtor has refused or threatened to refuse
to pay its obligations for any reason; (iii) no account debtor is insolvent or
bankrupt; and (iv) no account receivable is pledged to any third party.
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2.30 Transactions with Affiliates. Schedule 2.30 is a true, correct and
complete list of all existing business relationships between each of Company and
the Subsidiaries and any of the officers, directors or shareholders thereof or
any of such officer's, director's, or shareholder's Affiliates. No officer,
employee or Affiliate of Company or any Subsidiary has any material interest in
any property, real or personal, tangible or intangible of Company or any
Subsidiary, is indebted or otherwise obligated to Company or any Subsidiary, has
any contractual relationship with Company or any Subsidiary or is an officer,
director, employee or consultant of a competitor of Company or any Subsidiary.
Neither Company nor any Subsidiary is indebted or otherwise obligated to any
such person, except for amounts due under normal arrangements applicable to all
employees generally as to salary or reimbursement of ordinary business expenses
not unusual in amount or significance. The consummation of the transactions
contemplated by this Agreement will not (either alone, or upon the occurrence of
any act or event, or with the lapse or time, or both) result in any benefit or
payment (severance or other) arising or becoming due from Company or any
Subsidiary or the successor or assign of any thereof to any person.
2.31 Data Processing. Company's and each Subsidiary's records, to the
extent they contain important information that is not easily and readily
available elsewhere, have been duplicated, and such duplicates are stored safely
and securely pursuant to procedures and techniques utilized by companies of
comparable size in similar lines of business. The data processing equipment,
data transmission equipment, related peripheral equipment and software used by
the foregoing in the operation of the business to generate and retrieve such
records are comparable in performance, condition and capacity with those
utilized by companies of comparable size in similar lines of business and are
free from limitations on capacity or readiness to accept, create, manipulate,
sort, sequence, calculate, compare or output calendar date information,
including, but not limited to, functionality of peripheral interfaces, firmware
and embedded microchips
2.32 Brokerage. No broker, finder or investment banker has acted directly
or indirectly for Company, any Selling Stockholder or any Affiliate thereof in
connection with this Agreement or the transactions contemplated hereby. No
broker, finder or investment banker is entitled to any brokerage, finder's or
other fee or commission in respect of any such transaction based in any way on
agreements, arrangements or understandings made by or on behalf of Company, any
Selling Stockholder or any Affiliate thereof.
2.33 Products. Schedule 2.33 lists each product under development,
developed, manufactured, licensed, distributed or sold by Company and any other
products in which the Company has any proprietary rights or beneficial interest
(collectively, the "Products.")
2.34 Accuracy of Representations. No representation, warranty, statement
or schedule furnished by any Selling Stockholder or Company to Buyer in
connection with the transactions contemplated hereby contains any untrue
statement of any material fact or omits to state any material fact necessary in
order to make the statements contained herein or therein not misleading.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Selling Stockholders that the statements
contained in this Article III are correct and complete as of the date of this
Agreement and will be correct and complete as of the Closing Date (as though
made then and as though the Closing Date were substituted for the date of this
Agreement throughout this Article III):
3.1 Organization and Standing. Buyer is a company limited by shares duly
organized, validly existing and in good standing under the laws of Taiwan, has
the requisite power to own, lease and operate its assets, properties and
business and is duly qualified as a foreign corporation in good standing under
the laws of each state or jurisdiction in which either the ownership or use of
the properties owned or used by it, or the nature of the activities conducted by
it, requires such qualification.
3.2 Authority. Buyer has all requisite corporate power and authority to
execute and deliver this Agreement and each Transaction Document and to perform
its obligations hereunder and thereunder. This Agreement has been, and each
Transaction Document will be prior to each Closing, duly authorized, executed
and delivered by Buyer, and (assuming the due authorization, execution and
delivery by each Selling Stockholder and Company) this Agreement constitutes,
and each Transaction Document when so executed and delivered will constitute,
the legal, valid and binding obligations of Buyer enforceable against Buyer in
accordance with its terms.
3.3 No Violation of Law and Agreements. Except as set forth on Schedule
3.3, the execution and delivery by Buyer of this Agreement and each Transaction
Document, and the performance by Buyer of its obligations hereunder or
thereunder, does not and will not:
(a) violate any provision of the Articles of Incorporation of Buyer;
(b) (i) violate any provision of Applicable Law relating to Buyer;
(ii) violate any provision of any order, arbitration award, judgment or decree
to which Buyer is subject; or (iii) require a registration, filing, application,
notice, consent, approval, order, qualification or waiver with, to or from any
Governmental Authority; or
(c) (i) require a consent, approval or waiver from, or notice to,
any party to any contract to which Buyer or any Affiliate thereof is a party; or
(ii) result in a breach of or cause a default under any provision of a contract
to which Buyer or any Affiliate thereof is a party.
3.4 Brokerage. No broker, finder or investment banker has acted directly
or indirectly for Buyer or any Affiliate thereof in connection with this
Agreement or the transactions contemplated hereby. No broker, finder or
investment banker is entitled to any brokerage, finder's or other fee or
commission in respect of any such transaction based in any way on agreements,
arrangements or understandings made by or on behalf of Buyer or any Affiliate
thereof.
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ARTICLE IV
COVENANTS AND AGREEMENTS OF SELLING STOCKHOLDERS AND COMPANY
4.1 Conduct of Business. From the date hereof through the Closing Date,
Selling Stockholders shall cause Company to, and Company shall, without the
prior written consent of Buyer in each instance, (i) conduct its business only
in the ordinary course, (ii) maintain all of its assets in customary repair,
order and condition, (iii) not alter its capital structure or issue additional
securities or make any distribution to its stockholders, (iv) use its
commercially reasonable efforts to preserve its present business organization,
retain the services of its present employees and preserve its present
relationship with its customers and suppliers, and (v) not undertake any of the
actions specified in Section 2.10.
4.2 Efforts to Close. From the date hereof through the Closing Date, each
Selling Stockholder and Company shall use commercially reasonable efforts to
take, or cause to be taken, all actions, and shall do, or cause to be done, all
things necessary, proper or advisable to consummate and make effective as
promptly as practicable the transactions contemplated hereby (including, without
limitation, using commercially reasonable efforts to satisfy Buyer's conditions
to the Closing), and shall cooperate with Buyer in connection with the
foregoing.
4.3 Continued Effectiveness of Representations and Warranties of Selling
Stockholders . From the date hereof through the Closing Date, (i) each Selling
Stockholder shall, and each Selling Stockholder shall cause Company to, use
commercially reasonable efforts to conduct its affairs in such a manner so that,
except as otherwise contemplated or permitted by this Agreement, the
representations and warranties contained in Article II shall continue to be true
and complete on and as of the Closing Date as if made on and as of the Closing
Date, and (ii) Company and each Selling Stockholder shall promptly notify Buyer
of any event, condition or circumstance occurring from the date hereof through
the Closing Date that would constitute a violation or breach of this Agreement
by each Selling Stockholder or Company and of any changes to any of the
Disclosure Schedules; provided, however, that such disclosure shall not be
deemed to cure any breach of a representation, warranty, covenant or agreement
or to satisfy any condition. Notwithstanding the foregoing, Company shall not be
liable for any breach of the representations and warranties contained in Article
II.
4.4 Corporate Examinations and Investigations. Prior to the Closing Date,
Buyer shall be entitled, through its employees, agents and representatives, to
make such investigation of the assets, liabilities, properties, business and
operations of Company and the Subsidiaries, and such examination of the books,
records and financial condition of Company and the Subsidiaries, as Buyer
reasonably determines is necessary; provided, however, that in each case, such
inspections and examinations shall be conducted only (i) during regular business
hours; and (ii) in a manner which will not unduly interfere with the operation
of Company's business or the use of, access to or egress from the Facilities.
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4.5 Lessor Certificates. Selling Stockholders and Company shall obtain
from LSC and Myson Century, Inc. certificates addressed to Buyer and Company in
substantially the form attached hereto as Exhibit A stating (i) that the
applicable lease is and will continue to be in full force and effect and has not
been modified or amended, except as indicated in such certificate, and neither
the Landlord nor Company is in default thereunder, (ii) the expiration date of
the term thereunder, (iii) the rent and other charges payable thereunder and
(iv) the date through which rent and other charges have been paid thereunder.
4.6 Insurance. From the date hereof through the Closing Date, Selling
Stockholders shall cause Company and the Subsidiaries to maintain, and Company
shall maintain and cause the Subsidiaries to maintain, in full force and effect
(including necessary renewals thereof) the insurance policies listed on Schedule
2.22, except to the extent that they may be replaced with equivalent policies
appropriate to insure the assets, properties and business of Company and the
Subsidiaries to the same extent as currently insured.
4.7 Cooperation. Company and Selling Stockholders shall use its
commercially reasonable efforts to provide Buyer or its Representatives with any
other document related to Company and the Subsidiaries that Buyer may reasonably
request and shall otherwise cooperate (i) in Buyer's examination of Company and
the Subsidiaries, and (ii) with Buyer's financing sources.
4.8 Expenses. Except as expressly set forth on Schedule 4.8, LSC shall
bear all expenses incurred on behalf of Selling Stockholders, Company or any
Subsidiary in connection with the preparation, execution and performance of this
Agreement and the transactions contemplated hereby, including, without
limitation, all fees and expenses of its agents, representatives, counsel and
accountants.
4.9 Further Assurances. Selling Stockholders and Company shall execute
such documents and other papers and take such further actions as may be
reasonably required or desirable to carry out the provisions hereof and the
transactions contemplated hereby.
4.10 Hsinchu Science Park. Selling Stockholders and Company shall use
their commercially reasonable efforts to assist Buyer in complying with its
obligations under Section 5.4.
4.11 No Solicitation of Transactions. Neither Selling Stockholders nor
Company shall, directly or indirectly, solicit, encourage, initiate or hold
discussions or negotiations with, provide any nonpublic information to, or enter
into any agreement with, any Person (other than Buyer and its employees,
representatives and agents) with respect to a merger, consolidation, sale of a
substantial amount of assets, sale of securities or acquisition of beneficial
ownership of Company or any Subsidiary.
4.12 Noncompetition.
(a) As used in this Agreement, the term "Competitive Activity" shall
mean any participation in, employment by, ownership of any interest in,
acceptance of business from or assistance, promotion or organization of any
person, partnership, corporation, firm, association or other business
organization, entity or enterprise which, directly or indirectly, is engaged in,
or hereinafter engages in, research on, or the development, production,
marketing or selling of any product which is substantially equivalent to any
product now manufactured or sold, or presently under development by Company,
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including, but not limited to, the Products; provided, however, that the term
"Competitive Activity" shall not include (i) investments in portfolio funds,
(ii) investments of less than one year obtained through a purchase executed on a
stock exchange and not exceeding five percent (5%) of the outstanding capital
stock of the company in which the investment is held or (iii) the situation in
which Company manufactures the front-end fabricated wafers and sells such wafers
to LSC and LSC, after assembling and testing such wafers, sells the finished
product to third parties.
(b) Until the third anniversary of the Closing Date, LSC shall
refrain from, without the prior written consent of Buyer in each instance,
directly or indirectly, engaging in any Competitive Activity in any of the
following geographic areas:
(i) Taiwan;
(ii) The People's Republic of China;
(iii) the United States of America; and
(iv) anywhere in the world.
(c) LSC shall not, without the prior written consent of Buyer in
each instance, disclose or use in any way any confidential business or technical
information or trade secret of Company, whether or not patentable, copyrightable
or otherwise protected by law (collectively, the "Trade Secrets"), including,
without limitation, any information concerning Company Intellectual Property,
customer lists, products, designs, processes, procedures, operations,
investments, financing, costs, employees, purchasing, accounting, marketing,
merchandising, sales, salaries, pricing, profits and plans for future
development, the identity, requirements, preferences, practices and methods of
doing business of specific parties with whom Company transacts business, and all
other information which is related to any product, service or business of
Company, other than information which is (or becomes, other than as a result of
the breach hereof by LSC) generally known in the industry in which Company
transacts business or is acquired from public sources; all of which Trade
Secrets are the exclusive and valuable property of Company.
(d) LSC shall not, directly or indirectly, employ or offer to
employ, call on, solicit, interfere with or attempt to divert or entice away any
employee or independent contractor of Company (or any person whose employment or
status as an independent contractor has terminated within the twelve (12) months
preceding the date of such solicitation) in any capacity if that person
possesses or has knowledge of any Trade Secrets of Company.
LSC hereby acknowledges and agrees that it would be difficult to fully
compensate Buyer for damages resulting from the breach or threatened breach of
the foregoing provisions and, accordingly, that Buyer shall be entitled to
temporary and injunctive relief, including temporary restraining orders,
preliminary injunctions and permanent injunctions, to enforce such provisions.
This provision with respect to injunctive relief shall not, however, diminish
Buyer's right to claim and recover damages.
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4.13 Appraisal Costs. The parties hereby acknowledge that Buyer currently
intends, but is not required, to merge Company with Buyer or a subsidiary of
Buyer after the Closing. In the event that such merger is consummated within one
year of the Closing Date and, as a result of such merger, Company, Buyer or any
Affiliate of Buyer (other than LSC) is required (whether under Section 317 of
the ROC Company Law, or pursuant to any settlement agreement) to pay to any
stockholder or former stockholder of Company consideration (whether cash, stock
or otherwise) with a fair market value (as determined by Buyer in good faith)
greater, on a per share basis, than NT$20.00, then LSC shall, within ten (10)
days after receipt of the written request of Buyer with supporting documents,
reimburse Buyer or any such Affiliate of Buyer in cash for one-half of the
difference between (x) such per share fair market value and (y) NT$20.00, plus
one-half of all costs reasonably incurred by Company, Buyer or any Affiliate of
Buyer (other than LSC) in connection with the determination or payment of such
consideration.
4.14 Severance Costs. In the event that Company, Buyer or any Affiliate of
Company or Buyer (other an LSC) is required to pay to any employee of Company
any severance payment as a result of the transactions contemplated by this
Agreement (including, but not limited to, the sale of Shares or the merger
referred to in Section 4.13), then LSC shall, within ten (10) days after receipt
of the written request of Buyer with supporting documents, reimburse Company,
Buyer or any Affiliate of Company or Buyer (other than LSC) in cash for one-half
of such severance payment; provided, however, that LSC shall not be required to
reimburse any severance costs related to the termination of an employee if such
employee is rehired within six months after his termination.
ARTICLE V
COVENANTS AND AGREEMENTS OF BUYER
5.1 Efforts to Close. From the date hereof through the Closing Date, Buyer
shall use commercially reasonable efforts to take, or cause to be taken, all
actions, and shall do, or cause to be done, all things necessary, proper or
advisable to consummate and make effective as promptly as practicable the
transactions contemplated hereby (including, without limitation, using
commercially reasonable efforts to satisfy Selling Stockholders' conditions to
the Closing), and shall cooperate with Seller in connection with the foregoing.
5.2 Expenses. Except as set forth in Section 4.8 and Schedule 4.8, Buyer
shall bear all expenses incurred on behalf of Buyer in connection with the
preparation, execution and performance of this Agreement and the transactions
contemplated hereby, including, without limitation, all fees and expenses of its
agents, representatives, counsel, and accountants.
5.3 Further Assurances. Buyer shall execute such documents and other
papers and take such further actions as may be reasonably required or desirable
to carry out the provisions hereof and the transactions contemplated hereby.
5.4 Hsinchu Science Park. Buyer shall use its commercially reasonable
efforts to obtain the approval of the Hsinchu Science Park to the change in
control of Company contemplated by this Agreement.
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ARTICLE VI
CONDITIONS TO THE OBLIGATIONS OF SELLING STOCKHOLDERS
The obligation of Selling Stockholders to complete the transactions
contemplated hereby is subject to the fulfillment on or prior to the Closing
Date of the following conditions, any one or more of which may be waived by it,
to the extent permitted by law.
6.1 Representations and Warranties. The representations and warranties of
Buyer contained herein shall be true and complete on and as of the Closing Date
as though made at and as of that date, and Buyer shall have delivered to Selling
Stockholders a certificate to such effect.
6.2 Compliance with Covenants. Buyer shall have performed and complied
with all terms, agreements, covenants and conditions of this Agreement to be
performed or complied with by it on or prior to the Closing Date, and Buyer
shall have delivered to Selling Stockholders a certificate to that effect.
6.3 Corporate Action. Buyer shall have delivered to Selling Stockholders
(i) certified copies of Buyer's Articles of Incorporation, Company License,
Business License, registration card and resolutions of Buyer's Board of
Directors, in form reasonably satisfactory to Selling Stockholders, approving
the execution and delivery of this Agreement and each Transaction Document and
the performance of Buyer's obligations hereunder and thereunder; (ii) an
incumbency certificate of Buyer, certified by the Chairman or Supervisor of
Buyer authorizing the signatory to execute this Agreement and any related
documents on behalf of Buyer; and (iii) a certified specimen of the official
chops (company chop and responsible person's chop).
6.4 Litigation. On the Closing Date, there shall be no Action pending or
threatened pertaining to the transactions contemplated hereby or to their
consummation.
6.5 Absence of Adverse Governmental Action. No action shall have been
taken, proposed or threatened and no statute, rule, regulation or order shall
have been proposed, enacted or entered by any Governmental Authority or by any
court with jurisdiction over the transactions contemplated hereby that threatens
to prohibit or unduly delay consummation of such transactions on the terms and
provisions herein set forth.
6.6 Filings; Consents; Waiting Periods. All registrations, filings,
applications, notices, consents, approvals, orders, qualifications and waivers
listed in Schedule 2.7 shall have been filed, made or obtained, including
obtaining the approval of the Hsinchu Science Park to the change in control of
Company contemplated by this Agreement.
6.7 Approval of Documentation. The form and substance of all certificates,
instruments, opinions and other documents delivered to Selling Stockholders
under this Agreement shall be satisfactory in all reasonable respects to Selling
Stockholders and their counsel.
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ARTICLE VII
CONDITIONS TO THE OBLIGATIONS OF BUYER
The obligation of Buyer to complete the transactions contemplated hereby
is subject to the fulfillment on or prior to the Closing Date of the following
conditions, any one or more of which may be waived by it, to the extent
permitted by law.
7.1 Representations and Warranties. The representations and warranties of
each Selling Stockholder contained herein shall be true and complete on and as
of the Closing Date as though made at and as of that date, and each Selling
Stockholder shall have delivered to Buyer a certificate to such effect.
7.2 Compliance with Covenants. Each Selling Stockholder and Company shall
have performed and complied with all terms, agreements, covenants and conditions
of this Agreement to be performed or complied with by it on or prior to the
Closing Date, and each Selling Stockholder and Company shall have delivered to
Buyer a certificate to that effect.
7.3 Corporate Action. Selling Stockholders shall have delivered to Buyer
(i) certified copies of Company's Articles of Incorporation, Company License,
Business License, registration card and resolutions of Company's Board of
Directors, in form reasonably satisfactory to Buyer, approving the execution and
delivery of this Agreement and each Transaction Document and the performance of
Company's obligations hereunder and thereunder; (ii) an incumbency certificate
or power of attorney of each Selling Stockholder and Company, certified by the
responsible person of each such Person authorizing the signatory to execute this
Agreement and any related document on behalf of such Person; and (iii) a
certified specimen of the official chops (company chop and responsible person's
chop) of each such Person.
7.4 Litigation. On the Closing Date, there shall be no Action pending or
threatened pertaining to the transactions contemplated hereby or to their
consummation.
7.5 Absence of Adverse Governmental Action. No action shall have been
taken, proposed or threatened and no statute, rule, regulation or order shall
have been proposed, enacted or entered by any Governmental Authority or by any
court with jurisdiction over the transactions contemplated hereby that threatens
to prohibit or unduly delay consummation of such transactions on the terms and
provisions herein set forth.
7.6 Filings; Consents; Waiting Periods. All registrations, filings,
applications, notices, consents, approvals, orders, qualifications, waivers and
notices listed in Schedule 2.7 or 3.3, shall have been filed, made or obtained,
including (i) all requisite filings or approvals with the Investment Commission
of the Ministry of Economic Affairs for re-investment of foreign investment,
(ii) obtaining approval from the Securities and Futures Commission and any other
applicable governmental agency of the withdrawal of Company's public company
status, (iii) qualifying the transactions contemplated by this Agreement or the
Transaction Documents as exempt from applicable public tender offer rules and
(iv) obtaining the approval of the Hsinchu Science Park to the change in control
of Company contemplated by this Agreement.
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7.7 Approval of Documentation. The form and substance of all certificates,
instruments, opinions and other documents delivered to Buyer under this
Agreement shall be satisfactory in all reasonable respects to Buyer and its
counsel.
7.8 No Material Adverse Changes. Since the date hereof, there shall not
have been any material adverse changes in the consolidated financial condition,
the results of operations or prospects of Company, and Company on a consolidated
basis shall not have sustained any material loss or damage, whether or not
insured.
7.9 Board of Directors. Selling Stockholders shall have caused the persons
designated by Buyer to be duly elected as the directors of Company.
7.10 Lessor Certificates. Buyer shall have received and approved the
estoppel certificates required by Section 4.5.
7.11 Continuation of Services. Dr. Yea-Fu Tsao shall have executed and
delivered an agreement in the form of Exhibit B hereto.
7.12 Consents or Waivers of Lessors. Buyer shall receive executed consents
or waivers of the lessors of the Leases, which require consent to a change in
control or merger of Company, in a form acceptable to Buyer.
7.13 Fairness Opinion. On or before the Closing Date, Buyer shall have
received an opinion of Duff & Phelps, LLC (or such other firm as the Board of
Directors of Buyer shall determine in its sole and absolute discretion) in form
and substance acceptable to the Board of Directors of Buyer in their sole and
absolute discretion to the effect that the terms of the transactions
contemplated by this Agreement are fair to the stockholders of Buyer (other than
LSC) from a financial point of view.
7.14 Wafer Purchase Agreement. LSC and Company each shall have executed
and delivered an agreement in the form of Exhibit C hereto.
7.15 Extension of Lease. LSC and Company shall have extended from December
31, 2005 to December 31, 2007 the term of the lease by Company from LSC of that
property at Fl.9, No. 19-5, San Chong Road, Nan Gang District, Taipei, Taiwan,
without any other change in the terms of such lease.
7.16 Purchase of Additional Shares. On or before the Closing Date, Buyer
shall have purchased from stockholders of Company (other than Selling
Stockholders) an aggregate of not less than 4,529,789 shares of the capital
stock of Company at a purchase price of not more than NT$20.00 per share.
7.17 Conduct of Business; Cooperation; Hsinchu Science Park. Since the
date hereof, there shall not have occurred (i) any adverse change in Company's
business organization, the services of its employees or its relationship with
its customers and suppliers, (ii) any failure of Company or a Selling
Stockholder to provide Buyer or its Representatives with any document, or
otherwise cooperate in any matter, referred to in Section 4.7, or (iii) the
failure of Hsinchu Science Park to approve the change in control of Company
contemplated by this Agreement.
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ARTICLE VIII
INDEMNIFICATION
8.1 Survival. Each covenant, agreement, representation and warranty
contained herein shall survive the Closing.
8.2 Selling Stockholders' Obligation to Indemnify. From and after the
Closing, each Selling Stockholder shall indemnify, defend and hold harmless
Buyer (and its directors, officers, employees, agents, Affiliates (other than
LSC) and assigns) (i) jointly and severally, from and against all Losses
resulting from or arising out of any inaccuracy in or any breach of any
representation or warranty of such Selling Stockholder or Company, or any
covenant or agreement of Company, contained in this Agreement or (ii) severally,
but not jointly, from and against any and all Losses resulting from or arising
out of any breach of any covenant or agreement of such Selling Stockholder
contained in this Agreement or, in the case of LSC only, any Transaction
Document; provided, however, that (iii) the indemnification obligation of LSC
under this Section 8.2 with respect to any Loss in excess of the Holdback Amount
shall be limited to 62% of such Loss, (iv) the aggregate indemnification
obligation of LSC under this Section 8.2 shall not exceed NT$620,540,000, (v)
the indemnification obligation of SSIL and SSIC shall be limited to their
proportionate share of the Holdback Amount, and (vi) the Selling Stockholders
shall not be liable under this Section 8.2 with respect to Losses for which
indemnification otherwise may be sought under this Section 8.2 unless (A) the
amount of such Losses related to any individual claim exceeds U.S.$100,000 or
(B) the aggregate amount of such Losses (together with all Losses for which
indemnification could be sought under Section 9.3 in the absence of the proviso
contained in the penultimate sentence thereof) exceeds U.S.$250,000.
8.3 Buyer's Obligation to Indemnify. From and after the Closing, Buyer
shall indemnify, defend and hold harmless each Selling Stockholder (and its
directors, officers, employees, Affiliates and assigns) from and against all
Losses resulting from or arising out of any inaccuracy in or any breach of any
representation, warranty, covenant or agreement of Buyer contained herein or in
any Transaction Document.
8.4 Notice of Asserted Liability. Promptly after the party entitled to
Indemnification ("Indemnitee") becomes aware of any fact, condition or event
that may give rise to Losses for which indemnification may be sought under this
Article VIII, Indemnitee shall give notice thereof in the manner provided in
this Section 8.4 (the "Claims Notice") to the indemnifying party ("Indemnitor").
The Claims Notice shall include a description in reasonable detail of any claim
or the commencement (or threatened commencement) of any action, proceeding or
investigation (an "Asserted Liability") against Indemnitee, and shall indicate
the amount (estimated, if necessary) of the Losses that have been or may be
suffered by Indemnitee. Failure of Indemnitee to promptly give notice hereunder
shall not affect the rights to indemnification hereunder, except to the extent
that Indemnitor demonstrates actual damage caused by such failure. Upon
Indemnitor's request, Indemnitee shall provide Indemnitor with full and
unrestricted access to all books and records relating to the Asserted Liability,
and to all employees or other persons who are knowledgeable about such Asserted
Liability, in order to allow Indemnitor to audit the status of such Asserted
Liability and the payments that have been, or will be, made with respect
thereto.
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8.5 Opportunity to Defend. Indemnitor may elect to compromise or defend,
at its own expense and by its own counsel reasonably acceptable to Indemnitor,
any Asserted Liability; provided, however, that Indemnitor may not compromise or
settle any Asserted Liability without the consent of Indemnitee, such consent
not to be unreasonably withheld, unless such compromise or settlement requires
no more than a monetary payment for which Indemnitee and any other indemnifiable
parties hereunder are fully indemnified. If Indemnitor elects to compromise or
defend such Asserted Liability, it shall within 15 days (or sooner, if the
nature of the Asserted Liability so requires) notify Indemnitee of its intent to
do so and Indemnitee shall cooperate in the compromise of, or defense against,
such Asserted Liability. If Indemnitor elects not to compromise or defend any
Asserted Liability, fails to notify Indemnitee of its election as herein
provided or contests its obligation to indemnify, Indemnitee may pay, compromise
or defend such Asserted Liability without prejudice to any right it may have
hereunder. In any event, Indemnitor and Indemnitee may participate, at its own
expense, in the defense of any Asserted Liability in respect of which it may
have an indemnification obligation hereunder. If either party chooses to defend
or participate in the defense of any Asserted Liability, it shall have the right
to receive from the other party any books, records or other documents within
such party's control that are necessary or appropriate for such defense.
8.6 Tax Adjustment. Any amounts payable by an Indemnitor to or on behalf
of an Indemnitee in respect of a Loss will be adjusted as follows: If an
Indemnitee is liable for any additional taxes as a result of the payment of
amounts in respect of an indemnifiable claim, the Indemnitor will pay to the
Indemnitee in addition to such amounts in respect of the Loss within ten days
after being notified by the Indemnitee of the payment of such liability (x) an
amount equal to such additional taxes (the "Tax Reimbursement Amount") plus (y)
any additional amounts required to pay additional taxes imposed with respect to
the Tax Reimbursement Amount and with respect to amounts payable under this
clause (y), with the result that the Indemnitee will have received from the
Indemnitor, net of the payment of taxes, an amount equal to the Loss.
8.7 Waiver of Subrogation and Other Rights. An Indemnitee will not be
required to proceed against any particular Indemnitor for indemnification or
otherwise in respect of any Losses before enforcing its rights hereunder against
any other Indemnitor, and each Indemnitor expressly waives all rights it may
have, now or in the future, under any statute, at common law, or at law or in
equity, or otherwise, to compel an Indemnitee to proceed against any Indemnitor
in respect of any Losses before proceeding against, or as a condition to
proceeding against, any other Indemnitor.
8.8 No Contribution. Anything to the contrary herein notwithstanding,
Selling Stockholders shall not have any right to seek any indemnification or
contribution from or remedy against Company, whether arising prior to or after
the Closing Date, in respect of any breach of any representation or warranty by
Company or the failure of Company to comply with any covenant or agreement to be
performed by Company on or prior to the Closing Date, and Selling Stockholders
hereby waive any such claim they may have against Company with respect thereto
whether at law, in equity or otherwise.
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8.9 Non-Exclusive Remedy. The provisions for indemnification set forth in
this Article VIII are not the exclusive remedies of the parties hereto with
respect to the matters addressed in this Article VIII.
ARTICLE IX
TAX MATTERS
9.1 Clearance Certificates. Company shall furnish to Buyer such clearance
certificates or similar documents that may be obtained from the R.O.C. taxing
authority certifying that no further tax is owed in respect of the period
covered by such certificate.
9.2 Transfer Taxes. The Selling Stockholders shall pay all sales, use,
transfer, real property, documentary and stamp taxes and recording and filing
fees applicable to any transaction contemplated by this Agreement, including the
applicable securities transaction tax.
9.3 LSC's Tax Indemnity. LSC shall indemnify and hold Buyer and Company
harmless from and against the entirety of any Taxes which LSC is responsible or
required to pay under any provision of this Agreement and from and against any
Losses that Buyer may suffer resulting from, arising out of, relating to, in the
nature of or caused by any liability of Buyer or Company for any such Taxes; any
liability with respect to any Taxes arising from any changes made on examination
or audit; any liability of any of Company or any Subsidiary for Taxes of any
person other than Company, whether (i) as a transferee or successor, (ii) by
contract, or (iii) otherwise; and any liability for Taxes which would not be
owed if all warranties and representations of Selling Stockholders or Company
hereunder had been true, complete and correct in all respects; provided,
however, that the Selling Stockholders shall not be liable under this Section
9.3 with respect to any liability for which indemnification otherwise may be
sought under this Section 9.3 unless (A) the amount of such liability related to
any individual claim exceeds U.S.$100,000 or (B) the aggregate amount of such
liability (together with all Losses for which indemnification could be sought
under Section 8.2 in the absence of the proviso contained therein) exceeds
U.S.$250,000. Any indemnification pursuant hereto shall also include reasonable
costs incurred by Buyer or Company (including reasonable fees and disbursements
of attorneys, accountants and expert witnesses) in connection with such
indemnification claim. Any indemnification payable by LSC pursuant hereto shall
be paid within the later of fifteen (15) days of Buyer's request therefor and
five (5) days prior to the date on which the liability upon which the
indemnification is based is required to be satisfied.
ARTICLE X
TERMINATION OF AGREEMENT
10.1 Termination.
(a) This Agreement may be terminated prior to the Closing as
follows:
(i) at the election of Selling Stockholders, if any one or
more of the conditions to its obligation to close has not been fulfilled by
March 31, 2006;
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(ii) at the election of Buyer, if any one or more of the
conditions to its obligation to close has not been fulfilled by March 31, 2006;
(iii) at the election of Selling Stockholders, if Buyer has
materially breached any material representation, warranty, covenant or agreement
contained herein; provided, however, that Selling Stockholders shall have no
termination right hereunder if the other conditions to the obligation of Selling
Stockholders to consummate the transactions contemplated herein shall have been
satisfied, unless such representation, warranty, covenant or agreement shall not
have been cured by Buyer by the earlier of (i) March 31, 2006, or (ii)
forty-five (45) days after Buyer shall have received written notice from Selling
Stockholders that it intends to exercise its right to terminate under this
subparagraph (iii);
(iv) at the election of Buyer, if Selling Stockholders or
Company has materially breached any material representation, warranty, covenant
or agreement contained herein; provided, however, that Buyer shall have no
termination right hereunder if the other conditions to the obligation of Buyer
to consummate the transactions contemplated herein shall have been satisfied,
unless such representation, warranty, covenant or agreement shall not have been
cured by Selling Stockholders or Company by the earlier of (i) March 31, 2006,
or (ii) forty-five (45) days after Selling Stockholders or Company shall have
received written notice from Buyer that it intends to exercise its right to
terminate under this subparagraph (iv);
(v) at the election of Selling Stockholders, on the one hand,
or Buyer, on the other hand, if any action shall have been instituted and be
continuing by any Governmental Authority with proper authority to restrain,
modify or prohibit the carrying out of the transactions contemplated hereby;
provided, however, that neither Selling Stockholders nor Buyer shall have any
termination right hereunder if the other conditions to the obligation of Selling
Stockholders or Buyer, as the case may be, to consummate the transactions
contemplated herein shall have been satisfied, unless such action, suit or
proceeding shall not have been stayed or terminated by the later of (i) March
31, 2006, or (ii) sixty (60) days after the commencement of such action, suit or
proceeding becomes known to Buyer or Selling Stockholders, as the case may be;
and
(vi) at any time on or prior to the Closing Date, by mutual
written consent of Selling Stockholders and Buyer.
(b) If Buyer or Selling Stockholders, as the case may be, elects to
terminate this Agreement pursuant to Section 10.1(a), the terminating party
shall deliver a notice to the other party hereto declaring its election to so
terminate this Agreement in accordance with the provisions of Section 10.1(a)
and setting forth therein the basis for such termination.
(c) Nothing in this Section 10.1 shall relieve any party of any
liability for a breach of this Agreement prior to the termination hereof. Upon
the termination of this Agreement, all other rights and obligations of the
parties under this Agreement shall terminate, except their obligations under
Sections 4.8, 5.2, 11.2, 11.4, 11.5, 11.12, 11.15, 11.16 and 11.17.
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10.2 Survival. If this Agreement is terminated, this Agreement shall
become void and of no further force and effect, except for the provisions of
this Agreement relating to the obligation of Buyer to keep confidential and not
to use certain information and data obtained by it from Selling Stockholders or
any Affiliate thereof and except for the provisions of Sections 4.8 and 5.2
hereof, Article VIII, Article IX and this Article X. None of the parties hereto
shall have any liability in respect to a termination of this Agreement pursuant
to this Article X, except to the extent that failure to satisfy the conditions
of Articles VI and VII, as applicable, results from the intentional or willful
breach or violation of the representations, warranties, covenants or agreements
of such party under this Agreement. For purposes of the preceding sentence, the
failure of any party to comply with its respective obligations under Article I
promptly after all conditions to such compliance shall have been fulfilled,
shall constitute an intentional or willful violation of the agreement herein
contained by such failing party.
10.3 Return of Materials. If this Agreement is terminated for any reason
whatsoever, each party shall return to the other all documents, work papers and
other material (including all copies thereof) obtained in connection with the
transactions contemplated hereby and will use all commercially reasonable
efforts, including instructing its employees, agents and representatives and
others who have had access to such information, to keep confidential and not to
use any such information, unless such information is now, or is hereafter,
disclosed, through no act or omission of such party, in any manner making it
available to the general public.
ARTICLE XI
MISCELLANEOUS
11.1 Notices. All notices, requests, demands and other communications
required or permitted to be given hereunder or under any Transaction Document
shall be in writing and shall be deemed to have been duly given (i) upon
receipt, if delivered personally, (ii) upon confirmation of receipt, if given by
electronic facsimile and (iii) on the third business day following mailing, if
mailed first-class, postage prepaid, certified mail, return receipt requested,
as follows:
(a) If to Buyer to:
DII Taiwan Corporation Ltd.
c/o Diodes Incorporated
3050 East Hillcrest Drive
Westlake Village, California 91362
Attention: Chief Financial Officer
Telecopier: (805) 381-3825
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with a copy to:
Pamir Law Group
14/F, 116 Nanking East Road, Section 2
Taipei, Taiwan
Attention: Michael D. Lee, Esquire
Telecopier: 886-2-2531-5814
Sheppard, Mullin, Richter & Hampton LLP
333 South Hope Street, 48th Floor
Los Angeles, California 90071
Attention: Peter M. Menard, Esquire
Telecopier: (213) 620-1398
(b) If to Selling Stockholders, at the address set forth below their
names on the signature pages hereof.
with a copy to:
Lee and Li
5F, Science Park Life Hub
1 Industry E. 2nd Rd.
Hsinchu Science Park
Hsinchu, Taiwan
Attention: Oliver Hung, Esquire
Telecopier: 886-3-5797880
(c) If to Company to:
Anachip Corporation
2F, 24-2 Gongyedong 4th Rd.
Hsinchu Science Park
Hsinchu 30077, Taiwan R.O.C.
Attention: President
Telecopier: (03) 567-8368
Any party may by notice given in accordance with this Section 11.1 to the
other parties designate another address or person for receipt of notices
hereunder.
11.2 Entire Agreement. This Agreement (including the schedules and
exhibits hereto) and the Transaction Documents contain the entire agreement of
the parties with respect to the purchase of the Shares and related transactions,
and supersedes all prior agreements, representation and warranties, written or
oral, with respect thereto.
11.3 Waivers and Amendments. This Agreement and each Transaction Document
may be amended, superseded, canceled, renewed or extended, and the terms hereof
or thereof may be waived, only by a written instrument signed by each of the
parties hereto or thereto or, in the case of a waiver, by the party waiving
compliance. The failure of a party to insist, in any one or more instances, upon
performance of the terms or conditions of this Agreement or any Transaction
Document shall not be construed as a waiver or relinquishment of any right
granted hereunder or of the future performance of any such term, covenant or
condition. No waiver on the part of any party of any right, power or privilege,
nor any single or partial exercise of any such right, power or privilege, shall
preclude any further exercise thereof or the exercise of any other such right,
power or privilege.
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11.4 Governing Law. This Agreement and each Transaction Document shall be
governed by and construed in accordance with the substantive and procedural laws
of Taiwan, the Republic of China applicable to agreements made and to be
performed entirely within such jurisdiction. The parties hereby agree that any
action, suit, arbitration or other proceeding arising out of or related to this
Agreement or any Transaction Document or the relationship created hereby or
thereby shall be conducted only in Taipei, Taiwan. Each party hereby irrevocably
consents and submits to the personal jurisdiction of and venue in Taipei, Taiwan
District Court for the first instance in any legal action, equitable suit or
other proceeding arising out of or related to this Agreement or any Transaction
Document or the relationship between the parties created hereby or thereby. Each
party hereto consents to service of process by any means authorized by the
applicable law of the forum in any action brought under or arising out of this
Agreement or any of the Transaction Documents, and each party irrevocably
waives, to the fullest extent each may effectively do so, the defense of an
inconvenient forum to the maintenance of such action or proceeding in any such
court. EACH PARTY HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE
FULLEST EXTENT IT MAY LEGALLY AND EFFECTIVELY DO SO, TRIAL BY JURY IN ANY SUIT,
ACTION OR PROCEEDING ARISING HEREUNDER.
11.5 Arbitration. Notwithstanding anything herein to the contrary, if
there shall be a dispute among any of the parties arising out of or relating to
(a) the negotiations of the transactions contemplated by this Agreement or any
Transaction Document; (b) this Agreement or any Transaction Document (including,
without limitation, the issue of arbitrability or the indemnities provided
herein or therein, or the breach thereof); or (c) the transactions contemplated
hereby or thereby, the parties agree that such dispute shall be resolved by
final and binding arbitration in Taipei, Taiwan, administered by Arbitration
Association of the Republic of China ("ROCAA"), in accordance with ROCAA rules
of practice then in effect or such other procedures as the parties may agree to.
Any award issued as a result of such arbitration shall be final and binding
between the parties thereto, and shall be enforceable by any court having
jurisdiction over the party against whom enforcement is sought. The fees and
expenses of such arbitration (including reasonable attorneys' fees) or any
action to enforce an arbitration award shall be paid by the party that does not
prevail in such arbitration.
11.6 Reference to New Taiwan Dollars. All references in this Agreement and
in any Transaction Document to amounts of money expressed in dollars are
references to New Taiwan dollars, unless otherwise indicated.
11.7 Binding Effect; Assignment. This Agreement and each Transaction
Document shall be binding upon and inure to the benefit of the parties and their
respective permitted successors and permitted assigns. Neither this Agreement
nor any Transaction Document, nor any of the rights hereunder or thereunder, may
be assigned by any party, nor may any party delegate any obligations hereunder
or thereunder, without the written consent of the other party hereto or thereto.
Any non-permitted assignment or attempted assignment shall be void.
Notwithstanding the foregoing, Buyer may assign this Agreement and the
Transaction Documents, and any of its rights hereunder or thereunder, and may
delegate any of its obligations hereunder or thereunder, to any Affiliate
thereof.
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11.8 No Third Party Beneficiaries. Nothing herein is intended or shall be
construed to give any person any legal or equitable right, remedy or claim under
or in respect of this Agreement or any provision contained herein, except as
otherwise provided herein.
11.9 Counterparts. This Agreement and each Transaction Document may be
executed by the parties in separate counterparts, each of which when so executed
and delivered shall be an original, but all such counterparts shall together
constitute one and the same instrument. Each counterpart may consist of a number
of copies hereof or thereof each signed by less than all, but together signed by
all of the parties.
11.10 Schedules and Exhibits. The schedules and exhibits attached to this
Agreement or to any Transaction Document are a part hereof or thereof, as
applicable, as if fully set forth herein or therein.
11.11 Headings, Gender and Person. The headings herein or in any
Transaction Document are for reference only and shall not affect the
interpretation of this Agreement or such Transaction Document. Whenever the
context requires in this Agreement or any Transaction Document, the masculine
pronoun shall include the feminine and the neuter, and the singular shall
include the plural.
11.12 Publicity. Subject to Section 11.17, all notices to third parties
and all other publicity concerning the transactions contemplated hereby or by
any Transaction Document shall be jointly planned and coordinated by Buyer and
Selling Stockholders.
11.13 Severability. Whenever possible, each provision of this Agreement
and any Transaction Document shall be interpreted in such manner as to be
effective and valid under applicable law, but if any provision of this Agreement
or any Transaction Document is held to be prohibited by or invalid under
applicable law, such provision shall be ineffective only to the extent of such
prohibition or invalidity without invalidating the remainder of such provision
or the remaining provisions of this Agreement or such Transaction Document. For
purpose of determining the scope of the covenants set forth in Section 4.12(b),
each of subparagraphs (i), (ii), (iii) and (iv) shall be considered a separate
covenant such that if the geographic scope of any such subparagraph shall be
determined by a court of competent jurisdiction to be excessive and invalid,
such subparagraph shall be severed and the remaining subparagraphs shall be
deemed enforceable and remain in full force and effect.
11.14 Time of Essence. Time is of the essence for each and every provision
of this Agreement and each Transaction Document.
11.15 Attorneys' Fees. If any legal action or other proceeding is brought
for the enforcement of this Agreement or any Transaction Document, or because of
an alleged dispute, breach, default or misrepresentation in connection with any
of the provisions hereof or thereof, the successful or prevailing party shall be
entitled to recover reasonable attorneys' fees and other costs incurred in that
action or proceeding, in addition to any other relief to which it may be
entitled.
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11.16 Confidential Information. The parties acknowledge that the
transactions described herein are of a confidential nature and shall not be
disclosed except to each party's respective Affiliates, consultants and
advisors, or as required by law, until such time as the parties make a public
announcement regarding the transactions in accordance with Section 11.12 hereof.
In connection with the negotiation of this Agreement and the preparation for the
consummation of the transactions contemplated hereby, each party acknowledges
that it has had and will have access to information relating to the other party
and its Affiliates. Each party shall treat such information as confidential,
preserve the confidentiality thereof and not duplicate or use such information,
except to Affiliates, advisors and consultants in connection with the
transactions contemplated hereby or by any Transaction Document. Company, at a
time and in a manner which it reasonably determines and after prior notice to
and consultation with Buyer, may notify employees of Company and the
Subsidiaries of the fact of the subject transaction.
11.17 No Publicity; Employee Letters. The parties agree not to disclose
the terms of this Agreement without the other party's prior written consent,
which may be withheld in the sole and absolute discretion of such party, except
for such disclosure as a party shall deem to be necessary or appropriate to
comply with applicable law; provided, however, that any such disclosure to be
made by any party shall be subject to prior review and reasonable approval of
each other party (including, without limitation, prior review of government
filings and press releases regarding the transactions contemplated hereby). The
parties agree that such disclosure requirements will include a public filing by
Buyer of the Agreement and related description of the transactions contemplated
hereby in either a Form 8-K, Form 10-Q or Form 10-K and a concurrent news
release (subject to prior review and consent in accordance with this Section
11.17). The parties agree to jointly prepare a letter to be delivered to each of
Company's employees with regard to the transactions contemplated hereby.
11.18 Mutual Drafting. The parties hereto are sophisticated and have been
represented by lawyers throughout the transactions contemplated hereto who have
carefully negotiated the provisions hereof. As a consequence, the parties do not
intend that the presumptions of California Civil Code Section 1654 and similar
laws or rules relating to the interpretation of contracts against the drafter of
any particular clause should be applied to this Agreement or any Transaction
Document and therefore waive their effects.
11.19 Further Assurances. Each party hereto shall execute such documents
and other papers and take such further actions as may be reasonably required or
desirable to carry out the provisions hereof and the transactions contemplated
hereby.
11.20 Covenant. Any covenant, term or provision of this Agreement or any
Transaction Document, which in order to be effective must survive the
termination of this Agreement or such Transaction Document, shall survive any
such termination.
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11.21 Actions of Selling Stockholders. Any approval, consent, notice or
other action required of Selling Stockholders may be given or taken by Selling
Stockholders holding a majority of the Shares, which approval, consent, notice
or other action shall be binding upon all other Selling Stockholders, and each
Selling Stockholder hereby approves and consents to the same.
ARTICLE XII
DEFINITIONS
12.1 Defined Terms. As used herein, the terms below shall have the
following meanings. Any of such terms, unless the context otherwise requires,
may be used in the singular or plural, depending upon the reference.
"Action" means any action, suit, proceeding or investigation (provided
that such investigation is by a Governmental Authority).
"Affiliate" means, with respect to any Person, any other Person
controlling, controlled by or under common control with such Person. The term
"Control" as used in the preceding sentence means, with respect to any Person,
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person.
"Applicable Law" means, with respect to any Person, any domestic or
foreign, federal, state, county or local statute, law, ordinance, rule,
administrative interpretation, regulation, order, writ, injunction, directive,
judgment, decree or other requirement of any Governmental Authority (including
any Environmental Law) applicable to such Person or any of its Affiliates or any
of their respective properties, assets, officers, directors, employees,
consultants or agents (in connection with such officer's, director's,
employee's, consultant's or agent's activities on behalf of such Person or any
of its Affiliates).
"Asserted Liability" has the meaning set forth in Section 8.4 hereof.
"Benefit Plan" means any plan, agreement, arrangement or commitment
(whether provided by insurance, self-insurance or otherwise) that is an
employment, consulting or deferred compensation agreement; or an executive
compensation, incentive, bonus, employee pension, profit sharing, savings,
retirement, stock option, stock purchase or severance pay plan; or a life,
health, post-retirement benefit, worker's compensation, unemployment benefit,
disability or accident plan; or a holiday, vacation, leave of absence, Christmas
or other bonus practice; or expense reimbursement, automobile or other
transportation allowance; or other employee benefit plan, agreement, arrangement
or commitment maintained by Company or with respect to which Company has or in
the future may have, any contribution or other liability or obligation with
respect to any current or former employees of Company, or their beneficiaries.
"Buyer" has the meaning set forth in the preamble hereof.
"Claims Notice" has the meaning set forth in Section 8.4 hereof.
"Closing" or "Closing Date" have the meanings set forth in Section 1.5
hereof.
-37-
"Company" has the meaning set forth in the preamble hereof.
"Company Financial Statements" has the meaning set forth in Section 2.8
hereof.
"Company Intellectual Property" shall mean any Intellectual Property that
is (i) owned by, (ii) licensed to, or (iii) was developed or created by or for
Company.
"Contracts" has the meaning set forth in Section 2.13 hereof.
"Disclosure Schedule" means a schedule prepared and delivered by Selling
Stockholders to Buyer pursuant to this Agreement that sets forth the exceptions
to the representations and warranties of Selling Stockholders contained herein.
Unless the context clearly indicates otherwise, each reference herein to any
numbered schedule is a reference to that numbered schedule which is included in
the Disclosure Schedule.
"Environmental Condition" means the introduction into the environment of
any pollution, including without limitation any contaminant, irritant or
pollutant or other Hazardous Substance (whether or not upon the Facilities or
other property of the Company or a Subsidiary and whether or not such pollution
constituted at the time thereof a violation of any Environmental Law as a result
of any Release of any kind whatsoever of any Hazardous Substance) as a result of
which Company has or may become liable to any person or by reason of which the
Facilities may suffer or be subjected to any lien.
"Environmental Laws" has the meaning set forth in Section 2.15(b) hereof.
"Facilities" means the Owned Property and the Leased Property.
"Former Facility" means each plant, office, manufacturing facility, store,
warehouse, improvement, administrative building and all real property and
related facilities which was owned, leased or operated by Company at any time
prior to the date hereof, but excluding any Facilities.
"GAAP" means accounting principles generally accepted in the Republic of
China.
"Governmental Authority" means any foreign, domestic, federal,
territorial, state, county or local governmental authority, quasi-governmental
authority or instrumentality, or any regulatory, administrative or other agency,
or any political or other subdivision, department or branch of any of the
foregoing.
"Hazardous Substance" shall mean any quantity of asbestos in any form,
urea formaldehyde, PCB's, radon gas, crude oil or any fraction thereof, all
forms of natural gas, petroleum products or by-products, any radioactive
substance, any toxic, infectious, reactive, corrosive, ignitable or flammable
chemical or chemical compound and any other hazardous substance, material or
waste (as defined in or for purposes of any Environmental Law), whether solid,
liquid or gas.
-38-
"Income Tax" means any federal, state, county, local or foreign Tax
imposed on or measured by gross or net income or a taxable base in the nature of
gross or net income (including franchise, alternative, minimum, alternative
minimum, add-on, surcharge and other similar Taxes), any Tax imposed in whole or
in part in lieu of any of the foregoing, and in each instance any interest
(including interest on deferred tax liability under Section 453A(c) of the IRC
and "look-back" interest under Section 460 of the IRC and similar amounts of
interest imposed by the IRC), penalties, additions to tax or similar charges
attributable to such Tax.
"Income Tax Return" means any Tax Return that relates to Income Tax.
"Indemnitee" has the meaning set forth in Section 8.4 hereof
"Indemnitor" has the meaning set forth in Section 8.4 hereof
"Intellectual Property" means all trademarks and trademark rights, trade
names and trade name rights, service marks and service mark rights, service
names and service name rights, patents and patent rights, utility models and
utility model rights, copyrights, mask work rights, brand names, trade dress,
product designs, product packaging, business and product names, logos, slogans,
rights of publicity, trade secrets, inventions (whether patentable or not),
invention disclosures, improvements, processes, formulae, industrial models,
processes, designs, specifications, technology, methodologies, computer software
(including all source code and object code), firmware, development tools, flow
charts, annotations, all Web addresses, sites and domain names, all data bases
and data collections and all rights therein, any other confidential and
proprietary right or information, whether or not subject to statutory
registration, and all related technical information, manufacturing, engineering
and technical drawings, know-how and all pending applications for and
registrations of patents, utility models, trademarks, service marks and
copyrights, and the right to sue for past infringement, if any, in connection
with any of the foregoing, and all documents, disks, records, files and other
media on which any of the foregoing is stored.
"IRC" means the Internal Revenue Code of 1986, as amended.
"Lease" has the meaning set forth in Section 2.14 hereof.
"Leased Property" has the meaning set forth in Section 2.14 hereof.
"Liability" or "Liabilities" means, with respect to any Person, any
liability or obligation of such Person of any kind, character or description,
whether known or unknown, absolute, contingent or threatened, secured or
unsecured, joint or several, due or to become due, vested or unvested,
executory, determined, determinable or otherwise and whether or not the same is
required to be accrued on the financial statements of such Person.
"Liens" means any mortgage, pledge, assessment, security interest, lease,
lien, easement, license, covenant, condition, restriction, adverse claim, levy,
charge, option, equity, adverse claim or restriction or other encumbrance of any
kind, or any contract to give any of the foregoing, except for any restrictions
on transfer generally arising under any applicable securities law.
-39-
"Losses" means all losses, costs, claims, Liabilities, damages, lawsuits,
judgments, fees, penalties, liens, taxes, demands and expenses (including
attorney's fees, court fees and expenses), and all amounts paid in the
investigation, defense or settlement of any of the foregoing; provided, however,
that Losses shall not mean lost profits. Without limiting the foregoing,
"Losses" is not limited to matters asserted by third parties, but includes
Losses incurred or sustained in the absence of third party claims.
"Owned Property" has the meaning set forth in Section 2.14 hereof.
"Permits" means all licenses, permits, franchises, approvals,
authorizations, consents or orders of, or filings with, any governmental
authority, whether domestic or foreign, federal, state, county or local, or any
other person, necessary or desirable for the past, present or anticipated
conduct of, or relating to the operation of the business of, Company and any
Subsidiary.
"Person" means an individual, corporation, partnership, association,
trust, estate or other entity or organization, including a Governmental
Authority.
"Products" has the meaning set forth in Section 2.33 hereof.
"Purchase Price" has the meaning set forth in Section 1.2 hereof.
"Recent Balance Sheet" has the meaning set forth in Section 2.8 hereof.
"Release" shall mean and include any spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, dumping,
migrating within the environment or disposing into the environment or the
workplace of any Hazardous Substance, and otherwise as defined in any
Environmental Law.
"Representative" means any officer, director, principal, attorney, agent,
employee or representative.
"Securities Act" means the Securities Act of 1933, as amended.
"Selling Stockholders" has the meaning set forth in the preamble hereof.
"Shares" has the meaning set forth in Recital A hereof.
"Subsidiary" means (i) any corporation in an unbroken chain of
corporations beginning with Company if each of the corporations other than the
last corporation in the unbroken chain then owns any shares of the capital stock
in one of the other corporations in such chain, (ii) any partnership in which
Company is a general partner, or (iii) any partnership in which Company or any
Subsidiary is a general or a limited partner.
"Tax" or "Taxes" means (whether or not disputed) taxes of any kind, levies
or other like assessments, customs, duties, imposts, charges or fees, including,
without limitation, Income Taxes, gross receipts, ad valorem, value added,
excise, real property, personal property, occupancy, asset, sales, use, license,
payroll, transaction, capital, capital stock, net worth, estimated, withholding,
employment, social security, unemployment, unemployment compensation, workers'
compensation, disability, utility, severance, production, environmental, energy,
business, occupation, mercantile, franchise, premium, profits, windfall profits,
documentary, stamp, registration, transfer and gains taxes, toll charges
(including toll charges under Sections 367 and 1492 of the IRC), or other taxes
of any kind whatsoever, imposed by or payable to the United States, or any
state, country, local or foreign government or subdivision, instrumentality,
authority or agency thereof or under any treaty, convention or compact between
or among any of them, and in each instance such term shall include any interest
(including interest on deferred tax liability under Section 453A(c) of the IRC
and "look-back" interest under Section 460 of the IRC and similar amounts of
interest imposed by the IRC), penalties, additions to tax or similar charges
imposed in lieu of a Tax or attributable to any Tax.
-40-
"Tax Return or Return" means any return, declaration, report, claim for
refund, information return or statement that relates to Taxes, including any
schedule or attachment thereto and any amendment thereof.
"Treasury Regulation" means any final, proposed or temporary regulations
promulgated under the IRC.
"Transaction Document" means, when used in reference to a particular
Person, any agreement, document or instrument to be executed by such Person in
connection with the transactions contemplated hereby.
-41-
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Agreement as of the date first above written.
"SELLING STOCKHOLDERS" LITE-ON SEMICONDUCTOR CORPORATION,
a Taiwan corporation
By /s/ C.H. Chen
-------------------------------------
C.H. Chen, Vice Chairman
9F, 233-2 Pao Chiao Road
Hsin-Tien City, Taipei 231
Taiwan R.O.C.
Attention: President
Telecopier: (02) 2915-8475
SHIN SHENG INVESTMENT LIMITED
By /s/ [Chop] [Chop]
-------------------------------------
Shan-Ko Hsu, President
16F., No. 2. Section 2, Dunhua S. Rd.
Taipei, Taiwan R.O.C.
Attention: President
Telecopier: 886-2-2700-3078
SUN SHINING INVESTMENT CORP.
By /s/[Chop] [Chop]
-------------------------------------
Shan-Ko Hsu, President
16F., No. 2. Section 2, Dunhua S. Rd
Taipei, Taiwan R.O.C.
Attention: President
Telecopier: 886-2-2700-3078
"BUYER" DII TAIWAN CORPORATION LTD.,
a Taiwan corporation
By /s/ [Chop] [Chop]
-------------------------------------
Steven Ho, General Manager
2F, 501-15, Chung-Cheng Road
Hsin-Tien City, Taipei
Taipei, Taiwan R.O.C.
Attention: General Manager
Telecopier: (02) 2218-0119
-42-
With respect only to Articles IV, VII, IX,
X and XI:
"COMPANY" ANACHIP CORPORATION,
a Taiwan corporation
By /s/ Lee Chao Fu
-------------------------------------
Lee Chao Fu, Supervisor
2F, 24-1 Gongyedong 4th Rd.
Hsinchu Science Park
Hsinchu 30077, Taiwan R.O.C.
Attention: President
Telecopier: (03) 567-8368
-43-
Schedule 1.1
Number of
Name Shares Sold. Purchase Price
- ---- ------------ -------------------------------------
Closing Date Holdback Amount
------------ ---------------
Lite-On Semiconductor Corporation 31,027,000 NT$558,486,000 NT$62,054,000
Shin Sheng Investment Limited 5,001,987 90,035,766 10,003,974
Sun Shining Investment Corp. 4,441,225 79,942,050 8,882,450
---------- -------------- -------------
TOTAL 40,470,212 NT$728,463,816 NT$80,940,424
========== ============== =============
Schedule 4.8
Expenses Responsible Party
- -------- -----------------
Sheppard, Mullin, Richter & Hampton, LLP Buyer
Pamir Law Group Buyer
Grand Cathay Buyer
Duff & Phelps, LLC Buyer
Yuanta Core Securities LSC
Lee and Li LSC
PricewaterhouseCoopers one-half Buyer; one-half LSC
C-1
EXHIBIT C
Wafer Purchase Agreement
This Wafer Purchase Agreement ("Agreement") is made and entered into as of the
_________ day of January, 2006, by and between Lite-On Semiconductor Corp. with
its principal place of business at 9F, 233-2 Pao Chiao Road, Hsin-Tien City,
Taipei 231, Taiwan, R.O.C. (herein referred to as "LSC"), and Anachip
Corporation, with its principal place of business at 2/F, 24-2 Industry E. 4th
Rd., Hsinchu Science Park, Hsinchu, Taiwan, R.O.C. (herein referred to as
"Anachip").
NOW, THEREFORE, IN CONSIDERATION OF THE MUTUAL COVENANTS CONTAINED HEREIN, THE
PARTIES AGREE AS FOLLOWS:
1. SCOPE
The purpose of this Agreement is to establish the terms and conditions
under which LSC will sell to Anachip, and Anachip will purchase from LSC,
semiconductor die in wafer form. This Agreement does not constitute an
order. Anachip's purchase orders (a "Purchase Order") (per Section 4) will
be required to purchase any Products from LSC.
2. DEFINITIONS
2.1 Wafer(s): Completed Products through wafer probe electrical testing.
2.2 Product(s): All semiconductor die in wafer form which are set forth
on Attachment 1, developed under Section 7, changed under Section 9
or introduced by LSC after the date of this Agreement.
2.3 Yield: The number of die on a wafer passing wafer probe electrical
testing, divided by the total number of die on a wafer.
2.4 Wafer Lot Yield: The average Yield of all wafers in one wafer Lot as
calculated in Section 2.3 above.
2.5 Lot: A lot of wafers started together using the same lot number and
processed through wafer fabrication as a single group.
2.6 Device Type: Different die types and sizes as set forth on
Attachment 1, developed under Section 7, changed under Section 9 or
introduced by LSC after the date of this Agreement.
3. TERM
3.1 This Agreement shall be effective as of the date hereof (the
"Effective Date") and continue for a period of two (2) years from
the Effective Date (the "Initial Term") unless terminated earlier as
otherwise provided herein. After the Initial Term, this Agreement
shall be renewed for additional two (2) year periods on a
period-to-period basis (each a "Renewal Term") if either party gives
written notice to the other party of its offer to renew at least
ninety (90) days prior to the end of the Initial Term or any Renewal
Term and the other party accepts such offer.
C-1
3.2 Except as otherwise provided in this Agreement, upon termination of
this Agreement the parties shall complete performance of all
Purchase Orders accepted by LSC prior to the effective date of
termination to the extent they require delivery within the two (2)
month period from the effective date of termination. Any portion of
an accepted Purchase Order outstanding on the effective date of
termination that does not require delivery within such time shall be
void. Any portion of an accepted Purchase Order outstanding on the
effective date of termination that requires delivery within such two
(2) month period shall remain in effect, subject to the terms and
conditions herein.
4. PURCHASE RIGHTS AND OBLIGATIONS
4.1 During the Initial Term and each Renewal Term of this Agreement,
Anachip shall have the right to purchase, and LSC, upon receipt of a
duly completed Purchase Order, shall sell to Anachip such number of
units of Products as Anachip may request.
5. INTENTIONALLY OMITTED
6. PRICE AND PAYMENT
6.1 The unit price for each Product shall be equal to the average unit
price for such Product purchased by Anachip from LSC during the six
(6) months ended December 31, 2005, excepting specific price
modifications as allowed herein.
6.1.1 In the event the cost to LSC of raw wafers increases by more
than twenty percent (20%) within any six (6) month period,
Anachip and LSC shall renegotiate in good faith an upward
adjustment to the prices thereafter of Products solely to
reflect such increase in the cost of raw wafers. If the
parties fail to agree regarding such adjustment within two (2)
months of LSC's written request therefor, either party may
terminate this Agreement by giving the other party thirty (30)
days written notice thereof.
6.2 New Device Types may be introduced from time-to-time by LSC, and the
prices therefore will be negotiated by Anachip and LSC in good faith
at the time of initial offering for sale by LSC.
6.3 The prices at which LSC agrees to sell the Products to Anachip
pursuant to this Agreement are inclusive of epitaxial substrate
costs, wafer processing costs, electrical testing per LSC's standard
procedures, packaging costs for shipment per LSC's standard
procedures, and any applicable taxes.
6.4 Delivery of Products and the risk of loss shall be F.O.B. LSC's
facility in Hsinchu Science Park as set forth in Incoterm 2000. It
shall be the responsibility of Anachip, at its own expense, to
insure any shipments against damage to or loss of Products. Unless
otherwise specified by Anachip, transportation will be by the most
cost effective method of transportation in keeping with any
particular delivery date. Packaging of shipments shall be in
accordance with LSC's standard practices. Any special packaging
requested by Anachip shall be made at Anachip's expense.
C-2
6.5 After the Initial Term, all prices may be subject to good faith
renegotiation for each Renewal Term, which new prices will become
effective on the first day of such Renewal Term.
6.6 Anachip shall make payment in full for any and all LSC invoices
within sixty (60) days of the last day of the month in which the
Product is shipped and invoiced. In the event Anachip fails to
comply with this provision, LSC reserves the right to suspend or
delay shipments. A finance charge equal to the lesser of 1.0 percent
per month (12 percent APR) or the highest rate permitted by law,
accrued daily, shall be assessed on all past due accounts. In any
event, exercising this provision shall not in any way alter
Anachip's responsibilities to abide by the terms of this Agreement.
6.7 At all times, Anachip will receive the best price offered by LSC to
commercial accounts purchasing comparable wafer quantities,
excepting special discounts or other short-term promotional prices.
In the event LSC offers special discounts or other short-term
promotional pricing for specific Products, Anachip shall have first
and equal opportunity to purchase Products under such promotions and
at such promotional prices.
6.7.1 Anachip represents and warrants that Products purchased under
this Agreement are for assembly by Anachip into a higher level
of assembly, and are expressly NOT for resale as die in wafer
form or any other form. Anachip agrees that it shall not
resell Products purchased from LSC, in wafer or die form,
without the prior written consent by LSC, which consent shall
not be unreasonably withheld. In addition to any other
remedies available to LSC, breach of this Section 6.7.1 shall
sever Section 6.7 and related subsections from this Agreement,
without relieving either party from any and all remaining
obligations herein.
7. ADDITIONAL SERVICES
7.1 Product Development: Both parties agree to use commercially
reasonable efforts to develop, design and manufacture such new
products as required to meet the requests of Anachip's customers.
Non-recurring expense ("NRE") charges may be assessed by LSC for
development of products to Anachip's specifications. Payment of NRE
charges by Anachip to LSC shall not convey to Anachip any ownership
interest in or any license or right to produce existing or developed
products or processes of LSC.
8. WARRANTIES
C-3
8.1 All Products sold by LSC under this Agreement shall have Wafer Lot
traceability using a lot number assigned by LSC. Any and all
communications between Anachip and LSC concerning warranty issues
shall reference this lot number.
8.2 All Products shall meet the specifications therefor set forth on
Attachment 1 hereto. Any new product or Device Type introduced by
LSC after the date of this Agreement or developed pursuant to
Section 7 shall meet such specifications as Anachip and LSC shall
mutually agree. Any deviations from such specifications must be
approved in writing by Anachip and LSC. Products shipped by LSC to
Anachip shall be electrically tested per specifications in effect at
time of purchase.
8.3 Anachip shall promptly inspect Products upon delivery of the
Products to a designated Anachip facility. Anachip shall complete
all inspections within thirty (30) days of delivery.
8.4 If any Product is claimed to be defective by Anachip, Anachip may,
before the end of the inspection period, submit a Corrective Action
Request ("CAR") to LSC for LSC's evaluation and/or analysis of the
claimed defective Product. Failure by Anachip to deliver a CAR to
LSC within thirty (30) days after delivery of the Products shall
constitute acceptance of the Products by Anachip.
8.5 Upon receipt of a CAR tracking number, Anachip shall promptly return
samples exhibiting the claimed defect to LSC for analysis. Cartons
containing samples returned for analysis shall have the CAR tracking
number clearly marked on the outside of the carton. Failure to
comply with this provision may result in LSC rejecting the return
shipment.
8.6 Upon completion of LSC's analysis, LSC will judge the claim as
either valid or invalid. If LSC agrees the defect as claimed is
valid, a Returned Material Authorization ("RMA") number will be
provided by LSC for return of the materials (wafers and/or wafer
lots) claimed under the initial request. Cartons containing returned
materials shall have the RMA tracking number clearly marked on the
outside of the carton. Failure to comply with this provision may
result in LSC rejecting the return shipment.
8.7 If LSC determines that the defect as claimed is invalid, then
Anachip may dispute the claim as set forth in Section 15.
8.8 Upon receipt of and verification that materials returned under RMA
are in good condition and of indicated quantity, LSC will issue a
credit memo to Anachip for adjustment of the amount invoiced to
Anachip.
8.9 LSC's indemnification on warranty of Products shall be strictly
limited as set forth in Article 10 below.
8.10 The provisions of the warranties set forth in this Agreement shall
not apply to, and no warranty of whatever kind shall exist for, any
Product or part thereof which has been subject to misuse, negligence
or accident or that has been altered by anyone other than LSC nor to
normal deterioration of any Product or part thereof due to wear,
usage or exposure. In addition, LSC is not responsible for damages
of whatever nature resulting from improper installation or
operations beyond design capability, whether intentional or
accidental.
C-4
8.11 EXCEPT AS SPECIFICALLY STATED IN THIS SECTION, LSC DISCLAIMS ALL
WARRANTIES, WHETHER EXPRESSED, IMPLIED OR STATUTORY, INCLUDING, BUT
NOT LIMITED TO, ANY WARRANTIES AS TO THE QUALITY OF THE PRODUCTS,
AND ANY IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE.
9. PRODUCT CHANGES AND APPROVALS
9.1 After Products sold under this Agreement have been qualified and
released (in accordance with the parties' course of performance) by
both Anachip and LSC, all major manufacturing processes shall remain
unchanged unless both parties agree via the procedure below to
modify that process.
9.1.1 LSC will provide Anachip with written notice of any proposed
major process change, accompanied by the appropriate data to
support the change.
9.1.2 Anachip will have fourteen (14) working days to accept or
reject the proposed change in writing. In the event Anachip
fails to reply within the fourteen (14) day period, the
proposed change will be considered as accepted by Anachip and
may be fully implemented by LSC.
9.1.3 Anachip shall have the right to require re-qualification of
any Product where there has been a major process change. Upon
Anachip's acceptance of the proposed change, the newer process
shall be deemed qualified and may be fully implemented by LSC.
LSC shall, through lot traceability, be able to identify
Product processed under both the old and new processes.
9.1.4 If Anachip rejects a proposed major process change, Anachip
shall identify to LSC the reason for such rejection of the
proposed change. LSC shall have the option, in LSC's sole
discretion, to (a) continue to manufacture for Anachip
hereunder using the previously qualified process; (b)
eliminate such product, offering Anachip the opportunity to
place a last-time buy; or (c) a combination of (a) and (b) or
other alternatives as may be mutually acceptable to Anachip
and LSC.
9.2 Anachip may, at any time, submit written requests for change to
Products regarding specifications, designs, drawings, features, or
other characteristics of Products covered by this Agreement. LSC
may, at its sole discretion, notify Anachip in writing that
implementation of the requested change(s) renders LSC unable to
comply with its obligations hereunder. Both parties hereby agree
that any and all change requests shall be acted upon by LSC only if
such suggested change is in writing, cost impacts have been
evaluated, and agreement reached on new prices, NRE payments, and/or
other compensation resulting from the costs associated with the
requested change.
C-5
9.2.1 LSC will reply to all change requests submitted by Anachip in
writing, indicating LSC's response to the requested change. If
the requested change is accepted by LSC in writing, such
change is assumed to be a written amendment to this Agreement,
executed by both parties.
9.3 Any changes to Products made in compliance with this Agreement shall
not relieve LSC of any of LSC's obligations hereunder unless such
relieved obligation has been covered by a written amendment to this
Agreement, executed by both parties.
10. INDEMNIFICATION AND LIMITATION OF LIABILITY
10.1 Anachip hereby agrees to indemnify LSC against and save it harmless
from all liability, claims or demands made by any party arising out
of damage to any property or death or injury to any employee of LSC
that is the result of negligence of Anachip.
10.2 LSC shall at all times defend, indemnify and hold harmless Anachip,
its officers, agents, directors, employees, representatives, and
permitted successors and assigns from and against any and all
losses, claims, demands, actions, suits, liabilities, damages, costs
or other expenses (including without limitation reasonable fees and
expenses of counsel and costs of investigation) related to or
arising out of any acts, duties or obligations of LSC or of any
personnel employed or otherwise engaged by the LSC, including (i)
injury and/or death to persons including Anachip's employees, agents
or representatives and damage to property, (ii) fines, levies or
other charges imposed by any governmental authority or agency, (iii)
failure to comply with or violation of any applicable federal,
state, local, or foreign laws, regulations, rules and ordinances,
(iv) any alleged infringement or violation of any patent right in
connection with the manufacture or sale of products by Anachip using
Products (unless the alleged infringement or violation was directed
by Anachip or due to the design by Anachip or for causes not
attributable to LSC). Anachip shall provide LSC (i) written notice
of any claim, demand, action, suit or other proceeding subject to
indemnification hereunder, and (ii) if such action is brought by a
third party, reasonable cooperation (at LSC's expense) in the
defense or settlement thereof. Notwithstanding the foregoing, LSC
may be represented in, but may not control, such action, suit, or
proceeding at its own expense and by its own counsel.
10.3 LSC shall not in any circumstances be liable to Anachip for anything
whatsoever other than the direct loss to Anachip (excluding any loss
of use, revenue or profit by Anachip or the amount of damages
awarded against Anachip in favor of, or monies paid by Anachip by
way of settlement to, any third party and any costs or expenses of
Anachip in connection with the same) due to the failure of Products
or defective Products.
C-6
10.4 At all times and under all conditions, LSC's liability for direct
loss or damages is strictly limited to the value of the Product
shipped and invoiced, and at no time shall LSC's liability exceed
the value of the original amount invoiced by LSC or paid by Anachip,
whichever is less.
10.5 IN NO EVENT SHALL EITHER PARTY BE LIABLE FOR ANY ACTION IN CONTRACT,
TORT (INCLUDING NEGLIGENCE), STRICT LIABILITY OR ANY OTHER THEORY OR
FORM OF ACTION FOR ANY CONSEQUENTIAL, INCIDENTAL, INDIRECT, SPECIAL
OR PUNITIVE DAMAGES, LOSS OF PROFITS OR REVENUES, LOSS OF
ANTICIPATED PROFITS OR REVENUES, OR COST OF SUBSTITUTED PRODUCTS
INCURRED BY THE OTHER PARTY OR ANY OTHER PARTY AS A RESULT OF THE
PRODUCTS PROVIDED UNDER THIS AGREEMENT OR IN ANY WAY ARISING OUT OF
THIS AGREEMENT REGARDLESS OF WHETHER THE POSSIBILITY OF SUCH DAMAGE
WAS DISCLOSED TO OR REASONABLY COULD HAVE BEEN FORESEEN BY SUCH
PARTY AND THE LIABILITY OF LSC SHALL BE LIMITED TO THE TOTAL
PURCHASE PRICES ACTUALLY RECEIVED BY LSC FOR THE PRODUCTS IN DISPUTE
HEREUNDER.
10.6 No action for breach of this Agreement may be commenced more than
one (1) year after the date of the alleged breach.
11. FORCE MAJEURE
11.1 Neither party shall be liable to the other party for any inability
to comply with the provisions of this Agreement due to causes
reasonably beyond its control, including, but not limited to, fire,
flood, earthquake, explosion, accident, acts of public enemy, riots,
insurrections, war, labor disputes, transportation, or failures or
delays in transportation, embargoes, acts of God, acts of any
government, or any agency or department thereof or judicial action.
Upon the occurrence of such a force majeure condition, the affected
party shall promptly notify the other party and describe in
reasonable detail the circumstances of such condition and shall
promptly inform the other party of any further developments. If such
non-performance continues in effect for more than ninety (90) days,
the other party may, at its option, terminate this Agreement without
further cause or liability. Otherwise, this Agreement shall continue
in full force and effect for the remainder of its term upon
cessation of such event of force majeure.
12. ASSIGNMENT AND SUCCESSION
12.1 Neither party may assign or transfer (by operation of law or
otherwise) its rights or obligations under this Agreement without
the prior written consent of the other party, which consent shall
not be unreasonably withheld; provided, however, that Anachip may
assign or transfer all of its interests hereunder without the
consent of LSC to any person who controls, is controlled by or is
under common control with Anachip.
C-7
12.2 This Agreement shall be binding upon and inure to the benefit of the
parties' successors and permitted assigns.
13. TERMINATION
13.1 Either party may terminate this Agreement immediately in the event
that the other party is the subject of a petition filed in
Bankruptcy Court of the United States, Singapore, Hong Kong, or
Taiwan, whether voluntary or involuntary, if a receiver or trustee
is appointed for all or a substantial portion of the assets of the
petitioning party, or if the petitioning party makes an assignment
for the benefit of its creditors.
13.2 Unless otherwise provided herein, either party may terminate this
Agreement immediately in the event that the other party is in
material breach of this Agreement and has failed to cure such breach
within thirty (30) days after receipt of a written notice of default
by the terminating party.
14. PARAGRAPH TITLES
The paragraph titles herein are intended for convenience only and shall
not be construed to alter either parties' obligations or rights as
otherwise set forth herein.
15. GOVERNING LAW AND ARBITRATION
15.1 This Agreement and the performance hereunder shall in all respects
be governed, construed and interpreted in accordance with laws of
Taiwan, the Republic of China.
15.2 All disputes arising in connection with this Agreement shall be
settled amicably through good faith negotiation. In the event no
agreement can be reached after thirty (30) days, all disputes shall
be submitted to arbitration by an arbitration panel of three
arbitrators in Taipei, Taiwan before and under the rules of the
Arbitration Association of the Republic of China. The arbitration
panel's decision shall be written and shall be final, conclusive,
and binding, and judgment on any arbitration award may be entered in
any court of competent jurisdiction.
16. ENTIRE AGREEMENT
This Agreement, including all other documents incorporated by reference
and those attached hereto as Attachments, expresses the entire
understanding of the parties hereto and cancels and supersedes any
previous agreements, understandings or representations between the parties
relating to the subject matter hereof. This Agreement may not be modified
except in a writing signed by an authorized officer or representative of
each party.
17. SEVERABILITY
If any provision of this Agreement is held invalid, the remaining
provisions shall remain valid and in force, unless such invalidity would
frustrate the purpose of this Agreement.
C-8
18. NOTICES
Any notice to be given under this Agreement shall be in writing and shall
be sent to the appropriate party at the address first stated in this
Agreement, or to such other address as a party may later designate in
writing to the other. Notices shall be deemed to have been adequately sent
and delivered when received by the appropriate party, after having been
deposited in the United States mail (registered or certified), postage
prepaid.
19. PUBLICITY
Except as required by applicable law, neither party shall publicize or
otherwise disclose the terms of this Agreement without the prior approval
of the other party, which approval shall not be unreasonably withheld.
20. WAIVER
No failure or delay on the part of either party in the exercise of any
power, right or privilege arising hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such power, right
or privilege preclude other or further exercise thereof or of any other
right, power or privilege.
Lite-On Semiconductor Corp. Anachip Corporation
By: By:
---------------------------------- ---------------------------------
Name: Name:
---------------------------------- ---------------------------------
Title: Title:
---------------------------------- ---------------------------------
C-9
LOGO
FOR IMMEDIATE RELEASE
Diodes Incorporated Signs Definitive Agreement for Anachip
Acquisition
o Acquisition expected to be accretive to 2006 earnings
Westlake Village, California, December 20, 2005-- Diodes Incorporated (Nasdaq:
DIOD), a leading manufacturer and supplier of high quality discrete
semiconductors, announced today it signed a definitive stock purchase agreement
to acquire Anachip Corporation, a Taiwanese fabless analog IC company.
Headquartered in the Hsinchu Science Park in Taiwan, Anachip's main product
focus is Power Management ICs. Anachip's products are widely used in LCD
monitor/TV's, wireless 802.11 LAN access points, brushless DC motor fans,
portable DVD players, datacom devices, ADSL modems, TV/satellite set-top boxes,
and power supplies.
For the year ended December 31, 2005, revenue from Anachip's Power Management
ICs is expected to be approximately US$35 million, generating approximately
US$2.5 million in net income, and the acquisition is expected to be accretive to
Diodes' 2006 earnings. The all-cash transaction of NT$20 per Anachip share
(approximately US$30 million) is expected to in close mid-January 2006. The
selling shareholders include Lite-On Semiconductor Corporation (which owns
approximately 60% of Anachip's outstanding capital stock and holds approximately
23% of Diodes, Inc. common stock), and two Taiwanese venture capital firms
(together owning approximately 20% of Anachip's stock), as well as current and
former Anachip employees.
Commenting on the acquisition, Dr. Keh-Shew Lu, President and CEO of Diodes,
Inc., said, "We are looking forward to integrating Anachip into Diodes'
strategic business model. We plan to leverage Diodes' discrete component
technology, our world-class packaging capabilities and our sales and marketing
channels."
The completion of the transaction is subject to the terms of the definitive
agreement, the receipt of required approvals and other customary conditions.
About Anachip Corporation
Originally established in 1996, Anachip is an international corporation with
worldwide headquarters located in Hsinchu Science Park in Taiwan. This main
facility is home to corporate, engineering and testing facilities. In support of
its customers, Anachip has sales offices in the Silicon Valley, Seoul Korea,
Taipei and Kaohsiung Taiwan, Shenzhen and Shanghai, China, and a worldwide
network of authorized distributors in Europe, USA, China, Taiwan, Japan, Korea,
and India.
About Diodes Incorporated
Diodes Incorporated (Nasdaq: DIOD) is a leading manufacturer and supplier of
high-quality discrete semiconductor products, primarily to the communications,
computing, industrial, consumer electronics and automotive markets. The Company
operates four Far East subsidiaries, Diodes-China (QS-9000 and ISO-14001
certified) in Shanghai, our newest manufacturing facility in China,
Diodes-Shanghai, Diodes-Taiwan (ISO-9000 certified) in Taipei, and Diodes-Hong
Kong. Diodes-China and Diodes-Shanghai manufacturing focus are on subminiature
surface-mount devices destined for wireless devices, notebook, flat panel
display, digital camera, mobile handset, set-top box, DC to DC conversion, and
automotive applications, among others. Diodes-Taiwan is our Asia-Pacific sales,
logistics and distribution center. Diodes-Hong Kong covers sales, warehouse and
logistics functions. The Company's 5" wafer foundry, Diodes-FabTech (QS-9000
certified), specializes in Schottky products and is located just outside Kansas
City, Missouri. The Company's ISO-9001:2000 corporate sales, marketing,
engineering and logistics headquarters is located in Southern California. For
further information, including SEC filings, visit the Company's website at
http://www.diodes.com.
Safe Harbor Statement Under the Private Securities Litigation Reform Act of
1995: Any statements set forth above that are not historical facts are
forward-looking statements that involve risks and uncertainties that could cause
actual results to differ materially from those in the forward-looking
statements, including, but not limited to, any forecast of revenues or gross
margin. Potential risks and uncertainties include, but are not limited to, such
factors as fluctuations in product demand, the introduction of new products, the
Company's ability to maintain customer and vendor relationships, technological
advancements, impact of competitive products and pricing, growth in targeted
markets, risks of foreign operations, the following risks and uncertainties that
relate specifically to the acquisition: (i) the risk that the transaction will
not be consummated, including as a result of any of the conditions precedent;
(ii) the ability to obtain government approvals required for closing the
acquisition; (iii) the risk that the Anachip businesses will not be integrated
successfully into Diodes Incorporated; (iv) the risk that the expected benefits
of the acquisition may not be realized, including the realization of accretive
effects from the acquisition; and (v) Diodes Incorporated's increased
indebtedness after the acquisition, and other information detailed from time to
time in the Company's filings with the United States Securities and Exchange
Commission.
Source: Diodes Incorporated
CONTACT:
Crocker Coulson, President, CCG Investor Relations, (310) 231-8600 x 103,
e-mail: crocker.coulson@ccgir.com
or Carl Wertz, Chief Financial Officer, Diodes, Inc., (805) 446-4800.
- --------------------------------------------------------------------------------
Recent news releases, annual reports, and SEC filings are available at the
Company's website: http://www.diodes.com. Written requests may be sent directly
to the Company, or they may be e-mailed to: diodes-fin@diodes.com.
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