false DIODES INC /DEL/ 0000029002 0000029002 2019-08-08 2019-08-08

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): August 8, 2019

 

DIODES INCORPORATED

(Exact name of Registrant as Specified in Its Charter)

 

 

Delaware	002-25577	95-2039518
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(IRS Employer Identification No.)
4949 Hedgcoxe Road, Suite 200, Plano, TX		75024
(Address of Principal Executive Offices)		(Zip Code)

Registrant’s Telephone Number, Including Area Code: (972) 987-3900

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

 

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 (see General Instructions A.2. below):

☐	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))

 

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock, Par Value $0.66 2/3		DIOD		The NASDAQ Stock Market LLC

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 Emerging growth company  ☐

 If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

 

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Item 1.01 Entry into a Material Definitive Agreement.

On August 8, 2019, Diodes Incorporated (the “Company”) and Lite-On Semiconductor Corporation (“LSC”), a Taiwan-based supplier of “green” power-related discrete and analog semiconductor devices, announced they had entered into a Share Swap Agreement that provides for the acquisition of LSC by the Company (the “Agreement”).  LSC is publicly listed on the Taiwan Stock Exchange, stock code 5305.  A copy of the Agreement is attached as Exhibit 2.1 to the Report.

At the effective date of the transaction, each share of LSC stock will be converted into the right to receive TWD 42.50 in cash, or $1.37 USD as of June 30, 2019, without interest.  The aggregate consideration will be approximately $428 million.  The price per share reflects a premium of 35% over LSC’s 30-day volume-weighted average price.  The boards of directors of both companies have approved the transaction, which is still subject to approval by LSC shareholders as well as other customary closing conditions and regulatory approvals.  The transaction is expected to close during the second quarter of 2020.

The Company plans to fund the purchase price of the acquisition primarily with proceeds from a new financing agreement being arranged.  

The foregoing description of the Agreement and the transactions contemplated thereby does not purport to be complete and is qualified in its entirety by reference to the Agreement, a copy of which is filed as Exhibit 2.1 hereto and is hereby incorporated into this report by reference. The Agreement has been included to provide investors with information regarding its terms. It is not intended to provide any other factual information about the Company. In particular, the assertions embodied in the representations and warranties contained in the Agreement are subject to qualifications and limitations agreed to by the respective parties in connection with negotiating the terms of the Agreement, including information contained in any confidential disclosure schedules provided by the Company and LSC in connection with the signing of the Agreement. Moreover, certain representations and warranties in the Agreement were used for the purpose of allocating risk between the Company and LSC rather than establishing matters as facts. Accordingly, you should not rely on the representations and warranties in the Agreement as characterizations of the actual state of facts about the Company

 

Item 7.01 Regulation FD Disclosure.

On August 8, 2019, the Company issued a press release announcing the Company and LSC have entered into the Agreement.  A copy of the press release is attached as Exhibit 99.1.  The Company held a conference call to discuss the acquisition of LSC on August 8, 2019 at 4:00 p.m. Central Time (5:00 p.m. Eastern Time). For further information concerning the conference call, see the press release attached as Exhibit 99.1 to this Report. A recording of the conference call will be posted on the Company’s website at www.diodes.com shortly after the call.  A copy of the script for the call and presentation slides, are attached as Exhibit 99.2 and 99.3, respectively, to this Report. The information furnished in this Item 7.01, including exhibits 99.1, 99.2 and 99.3, will not be treated as “filed” for the purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities of that section. This information will not be deemed incorporated by reference into any filing under the Securities Act, or into another filing under the Exchange Act, unless that filing expressly refers to specific information in this Report.

Cautionary Information Regarding Forward-Looking Statements

Except for the historical and factual information contained in the press release and script attached as Exhibits 99.1, 99.2 and 99.3, any statements set forth herein 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. Such forward-looking statements include, but are not limited to, the following: the expected benefits of the acquisition, including the acquisition being immediately accretive; the efficiencies, cost savings, revenues, and enhanced product offerings, market position, and design and manufacturing capabilities of Diodes after the acquisition; and other statements identified by words such as “estimates,” “expects,” “projects,” “plans,” “will,” and similar expressions.  

Potential risks and uncertainties include, but are not limited to, such factors as: the possibility that the transaction may not be consummated, including as a result of any of the conditions precedent; the risk of superior acquisition proposal from other parties; the risk of Diodes being unable to obtain sufficient financing from lenders to complete the acquisition; the risk of global market downturn conditions and volatilities impacting the completion of the acquisition or the funding; the risk that such expectations may not be met; the risk that the expected benefits of the acquisition may not be realized or that integration of the acquired business may not be as rapid as we anticipate; the risk that LSC’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; the risk that LSC’s standards, procedures, and controls will not be brought into conformance within Diodes’ operation; difficulties coordinating Diodes’ and LSC’s new product and process development, hiring additional management and other critical personnel, and increasing the scope, geographic diversity, and complexity of Diodes’ operations; difficulties in consolidating facilities and transferring processes and know-how; difficulties in reducing the cost of LSC’s business; the diversion of our management’s attention from the management of our business; Diodes may not be able to maintain its current growth strategy or continue to maintain its current performance, costs, and loadings in its manufacturing facilities; risks of domestic and foreign operations, including excessive operation costs, labor shortages, higher tax rates, and Diodes’ joint venture prospects; the risk that we may not be able to increase our automotive, industrial, or other revenue and market share; the risks of cyclical downturns in the semiconductor industry and of changes in end-market demand or product mix that may affect gross margin or render inventory obsolete; the risk that our future outlook or guidance may be incorrect; unfavorable currency exchange rates; the risks of global economic weakness or instability in global financial markets; the

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risks of trade restrictions, tariffs, or embargoes; the risk of breaches of our information technology systems; and other information, including the “Risk Factors” detailed from time to time in Diodes’ filings with the United States Securities and Exchange Commission. You should not place undue reliance on these forward-looking statements, which speak only as of the date of the press release. The Company undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

 

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits.

Exhibit No.		Description
2.1		Share Swap Agreement between Diodes Incorporated and Lite-On Semiconductor Corporation
99.1		Press release dated August 8, 2019
99.2		Script for Conference Call
99.3		Presentation slides

 

 

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 hereunto duly authorized.

 

Dated: August 8, 2019		DIODES INCORPORATED
		By		/s/ Brett R. Whitmire
				Brett R. Whitmire
				Chief Financial Officer

 

Exhibit 2.1

EXECUTION

SHARE SWAP AGREEMENT

between

DIODES INCORPORATED

and

LITE-ON SEMICONDUCTOR CORP.

 

Dated as of August 8, 2019

 

 

 

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TABLE OF CONTENTS

 

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Exhibit AShare Capital on Share Swap Record Date

Exhibit BThird Party Consents of the Company

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SHARE SWAP AGREEMENT

THIS SHARE SWAP AGREEMENT (this “Agreement”), dated as of August 8, 2019 (the “Effective Date”), is being entered into by and between:

Buyer and the Company are hereinafter collectively referred to as the “Parties” and each separately as a “Party”.

RECITALS

WHEREAS, Buyer intends to implement a 100% share swap pursuant to Article 29 of the Taiwan Mergers and Acquisitions Act (the “M&A Act”) with the Company, whereby Buyer will designate a wholly-owned Subsidiary to acquire 100% of the issued and outstanding capital shares of the Company (the “Shares”) for such consideration as further described herein and on the terms and subject to the conditions set forth herein (the “Share Swap”), the Shares will be delisted from the TSE upon the Share Swap Record Date and, following the Share Swap Record Date, the public reporting status of the Company will be withdrawn;

WHEREAS, the Board of Directors of Buyer has approved the execution, delivery and performance by Buyer of this Agreement and the consummation of the transactions contemplated herein;

WHEREAS, each of the Special Committee of the Company and the Board of Directors of the Company (the “Company Board”) has determined that the transactions contemplated herein are fair to the Company and its shareholders (the “Company Board Determination”), and the Company Board has approved the execution, delivery and performance by the Company of this Agreement and the consummation of the transactions contemplated hereby, including the Share Swap, subject to the approval of the shareholders of the Company (the “Company Shareholders”); and

WHEREAS, as soon as possible after the Effective Date, an extraordinary shareholders meeting (the “Company Shareholders Meeting”) will be convened by the Company to request the approval of the Share Swap from the Company Shareholders.

AGREEMENT

NOW, THEREFORE, in consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:

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Article I
DEFINITIONS

Section 1.1Certain Definitions

.  For purposes of this Agreement:

“Acquisition Proposal” means any proposal, offer or inquiry (whether or not in writing) from any Person or group relating to any (i) acquisition, transfer, lease or license of assets of the Company Group equal to 20% or more of the Company’s consolidated assets, (ii) issuance or acquisition of 20% or more of the outstanding equity securities of the Company (or the issuance or acquisition of other securities convertible into or exchangeable for equity securities of the Company representing 20% or more of the outstanding equity securities of the Company), (iii) tender offer or exchange offer that if consummated would result in any person, entity or group beneficially owning 20% or more of the outstanding equity securities of the Company, (iv) merger, consolidation, amalgamation, share swap, share exchange, business combination, recapitalization, or similar transaction involving the Company or (v) joint venture, liquidation, dissolution or similar transaction that involves 20% or more of the consolidated assets, revenues or earnings of the Company.

“Affiliate” means, with respect to any Person, any other Person that, at the time of determination, directly or indirectly, through one or more intermediaries, controls, is controlled by or is under common control with, such first Person.

“Assets” means all of the assets and properties of the Company Group.

“Building Permits” mean all permits, licenses, easements, variances, exemptions, consents, certificates, authorizations, registrations, Orders and other approvals from Governmental Entities necessary for, or issued to, build, construct, maintain, demolish, remodel, refurbish and/or occupy any structures, buildings, infrastructure or utilities (or appurtenances thereto) relating to any Real Property.

“Business Day” means any day other than a Saturday, a Sunday or a day on which banks in Plano, Texas, USA or Taipei, Taiwan are authorized by Law or executed Order to be closed.

“Company Disclosure Letter” means a letter of even date hereof from the Company to Buyer, together with the schedules thereto, disclosing certain facts and circumstances in relation to the Company, subject to which the representations and warranties of the Company in Article IV of this Agreement are given.

“Company Employee Plan” means any plan, program, policy, practice, Contract or other arrangement providing for any bonus, compensation, severance, separation, termination pay, deferred compensation, management, employment, contractor or consulting services, incentive compensation, relocation, performance awards, stock or stock related awards, vacation, repatriation, expatriation, loans, visas, work permits, retention pay, change of control, disability, death benefit, retirement benefits, pension benefits, welfare benefits, hospitalization or insurance plan, fringe benefits or other employee benefits or remuneration of any kind, whether written, unwritten or otherwise, funded or unfunded, including, but not limited to, each employee benefit plan which is or has been maintained, contributed to, or required to be contributed to, by the Company Group for the benefit of any current or former employee of the Company Group, or with respect to which the Company Group has or may have any liability or obligation.

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“Company Equity Plans” means any employee, consultant, representative or director stock option, stock purchase or equity compensation plan, arrangement or agreement of the Company Group.

“Company Group” means the Company and its Subsidiaries set forth in Section 4.2(a) of the Company Disclosure Letter.

“Company Intellectual Property Rights” means any and all Intellectual Property Rights that are owned, used, held for use or practiced by the Company Group.

“Company Products” means all products, technologies and services developed (including products, technologies and services under development), made, provided, distributed or sold by the Company Group.

“Company Public Reports” means reports and other documents required to be filed with the FSC, stated in the Company’s annual report or publicly disclosed at the Market Observation Post System by the Company since January 1, 2017.

“Confidentiality Agreement” means the Confidentiality Agreement entered into by and amongst Buyer, the Company and Lite-On Technology Corp. as of July 4, 2019.

“Contract” means any instrument, contract, purchase order, agreement or other similar legally binding commitment or undertaking of any nature, whether written or oral.

“control” (including the terms “controlled,” “controlled by” and “under common control with”) means the possession, directly or indirectly or as trustee or executor, of the power to direct or cause the direction of the management policies of a Person, whether through the ownership of stock, as trustee or executor, by contract or credit arrangement or otherwise.

“Copyrights” means copyrights and mask work rights (whether or not registered) and registrations and applications therefor, worldwide.

“Environmental Law” means any applicable Law, and any Order or binding agreement with any Governmental Entity: (i) relating to pollution (or the cleanup thereof) or the protection of natural resources, endangered or threatened species, human health or safety, or the environment (including ambient air, soil, surface water or groundwater or subsurface strata); or (ii) concerning the presence of, exposure to, or the management, manufacture, use, containment, storage, recycling, reclamation, reuse, treatment, generation, discharge, transportation, processing, production, disposal or remediation of any Hazardous Substances.

“Environmental Permit” is any Permit required to be obtained from any Governmental Entity with respect to a Hazardous Substances Activity which is or was conducted by the Company Group.

“FSC” means the Financial Supervisory Commission of Taiwan.

“GAAP” means, with respect to any Person, generally accepted accounting principles in the jurisdiction in which such Person is domiciled in effect from time to time.

“Governmental Entity” means any court, administrative agency or commission or other governmental authority or instrumentality of any country or political territory with competent jurisdiction over the party and matter in question.

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“Hazardous Substances” means (i) any material, substance, chemical, waste, product, derivative, compound, mixture, solid, liquid, mineral or gas, in each case, whether naturally occurring or manmade, that is hazardous, acutely hazardous, toxic, or words of similar import or regulatory effect under Environmental Laws; and (ii) any petroleum or petroleum-derived products, radon, radioactive materials or wastes, asbestos in any form, lead or lead-containing materials, urea formaldehyde foam insulation and polychlorinated biphenyls.

“Hazardous Substances Activities” means the transportation, transfer, recycling, storage, use, treatment, manufacture, removal, remediation, release, exposure of others to, sale or distribution of any Hazardous Substances or any product or waste containing a Hazardous Substance, or product manufactured with ozone depleting substances, including, without limitation, any required labeling, payment of waste fees or charges (including so-called e-waste fees) and compliance with any product take-back or product content requirements.

“IFRS” means the International Financial Reporting Standards as endorsed by the FSC.

“Intellectual Property Rights” means intellectual property rights arising from or in respect of the following, whether protected, created or arising under the Laws of any jurisdiction (where applicable): Copyrights, Trade Secrets, Patents and Trademarks and analogous rights, including moral and economic rights of authors and inventors (however denominated) and including the right to enforce and recover damages for the infringement or misappropriation of any of the foregoing.

“IT Systems” means the computer, information technology and data processing systems, facilities and services used by the Company Group in the operation of their businesses.

“Law” or “Laws” mean any laws, statutes, rules, regulations, ordinances, orders and codes issued, enacted, adopted, promulgated, implemented or otherwise put into effect by or under any Governmental Entity.

“Legal Proceeding” means any action, claim, suit, litigation, proceeding (public or private), criminal prosecution, arbitration, appeal, mediation, conciliation, consent decree, audit or investigation by or before any Governmental Entity.

“Liability” means any liability, obligation or commitment of any kind, whether absolute, accrued, fixed or floating, matured or unmatured, determined or determinable or otherwise and whether or not required to be recorded or reflected on a balance sheet prepared in accordance with GAAP of Taiwan or Taiwan IFRS, as applicable, and “Liabilities” shall be construed accordingly.

“Lien” means any charge, mortgage, lien (statutory or otherwise), power of sale, hypothecation, usufruct, retention of title, right of preemption, encroachment, pledge, hypothecation, security interest, attachment, levy, encumbrance or other similar restriction of any kind on ownership or use, or any agreement or Contract to create any of the foregoing.

“Material Adverse Effect” means any Change that, individually or when taken together with all other such Changes that exist at the date of determination of the occurrence of a Material Adverse Effect,

(i) has or results in a material adverse effect on the business, Assets, Liabilities, financial condition or results of operations of the Company Group taken as a whole; provided, however, that no Changes resulting from, relating to or arising out of the following (by

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themselves or when aggregated with any other Changes) shall be taken into account when determining whether a Material Adverse Effect has occurred:

(A)any change in general economic, financial, business or political conditions or industry-wide (including but not limited to those affecting the securities markets or changes in interest rates or exchange rates);

(B)changes in applicable Law, GAAP or IFRS applicable to the Company Group, as the case may be;

(C)any acts of terrorism, major armed hostilities or war;

(D)any major natural disasters;

(E)any action required to be taken in connection with this Agreement or the failure to take any action that is expressly prohibited by this Agreement;

(F)with respect to the Company Group only, the buy-back of any Dissenting Shares; or

(G)any change directly attributable to the public announcement of the Share Swap or this Agreement,

in the case of each of (A), (C) or (D) above, to the extent that such conditions do not have a materially disproportionate impact on the Company Group, taken as a whole, relative to other companies of similar nature and comparable size; or

(ii) prevents or materially impedes, interferes with, hinders or delays the performance by the Company of its obligations under this Agreement or the consummation of its obligations under this Agreement, the Share Swap, or the other transactions contemplated hereby.

“Order” means any writ, judgment, decree, award, ruling, injunction, directive or similar order of any Governmental Entity, and any award or order of any arbitrator to the extent enforceable by a Governmental Entity, in each case whether preliminary or final.

“Ordinary Course of Business” means the ordinary course of business, consistent with past custom and practice, including with regard to nature, frequency, and magnitude.

“Organizational Documents” means (i) the certificate of incorporation, articles of association and the bylaws of a corporation, (ii) any charter or similar document adopted or filed in connection with the creation, formation or organization of a Person and (iii) any amendment to or restatement of any of the foregoing, as applicable.

“Patents” means any patents and patent applications, together with all reissuances, divisionals, continuations, continuations-in-part, revisions, renewals, extensions, and reexaminations thereof, and any identified invention disclosures.

“Permit” means any licenses, permits, approvals, registrations, authorizations, franchises, certifications, variances, exemptions, consents, orders and qualification filings with, of or from a Governmental Entity.

“Permitted Liens” means, with respect to any Real Property, (i) Liens for Taxes and other similar governmental charges and assessments which are not yet due, (ii) Liens of landlords

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and liens of carriers, warehousemen, mechanics and materialmen and other like Liens arising in the Ordinary Course of Business consistent with past practice for sums not yet due, or other liens securing the performance of bids, trade contracts, lease or statutory obligations (including workers’ compensation, unemployment insurance or other social security legislation) and (iii) security given in the Ordinary Course of Business to any public utility, Governmental Entity or other statutory or public authority having jurisdiction over the Company.

“Person” means an individual, corporation, partnership, limited liability company, association, trust or other entity or organization, including any Governmental Entity.

“Personal Information” means, in addition to all information defined or described as “personal information,” “personally identifiable information,” “PII,” or similar term in any privacy policy or other public-facing statement of the Company Group, all information regarding or capable of being associated with an individual consumer or device, including: (i) information that identifies, could be used to identify or is otherwise identifiable with an individual or a device, including name, physical address, telephone number, email address, financial account number, government-issued identifier (including social security number and driver’s license number), medical, health or insurance information, gender, date of birth, educational or employment information, religious or political views or affiliations, marital or other status, photograph, face geometry or biometric information, and any other data used or intended to be used to identify, contact or precisely locate an individual; (ii) any data regarding an individual’s activities online or on a mobile device or other application (e.g., searches conducted, web pages or content visited or viewed) associated with an identifiable individual; and (iii) internet protocol addresses or other persistent identifiers.  Personal Information may relate to any individual, including users of internet and device applications who view or interact with the Company, or a current, prospective or former customer, employee or vendor of any Person.  Personal Information includes information in any form, including paper, electronic and other forms.

“Registered Intellectual Property” means Patents, registered Copyrights and pending applications thereof, and Trademarks.

“Regulatory Approvals” means (i) approval by the Investment Commission of the Ministry of Economic Affairs of Taiwan for the Share Swap, (ii) consent from the Central Bank of China for the foreign exchange transactions necessary to convert foreign currency into New Taiwan Dollars for payment of the Payment Fund, (iii) consent from the TSE for the delisting of the Company and (iv) consent from the FSC to cancel the Company’s status as a public company.

“Subsidiary” means, with respect to any Person, any other Person of which stock or other equity interests having ordinary voting power to elect more than fifty percent (50%) of the board of directors or other governing body are owned, directly or indirectly, by (i) such first Person, (ii) such first Person and one or more of its Subsidiaries or (iii) one or more Subsidiaries of such first Person.  For the avoidance of doubt, Subsidiaries of the Company do not include On-Bright Electronics Incorporated and its Subsidiaries.

“Taiwan” means the Republic of China.

“Tax” or, collectively, “Taxes” means (i) any and all taxes, assessments and other similar charges, withholdings, duties, impositions, installments and Liabilities imposed by or payable to any Governmental Entity, including taxes based upon or measured by gross receipts,

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income, profits, sales, use and occupation, capital and value added, goods and services, ad valorem, transfer (including real estate transfer), franchise, withholding, payroll, recapture, employment, excise and property taxes as well as public imposts, fees and social security charges (including health, unemployment, workers’ compensation and pension insurance), together with all interest, penalties and additions imposed with respect to such amounts, (ii) any Liability for the payment of any amounts of the type described in clause (i) above as a result of being or having been a member of an affiliated, consolidated, combined, unitary, fiscal unity or similar group for any period, and (iii) any Liability for the payment of any amounts of the type described in clauses (i) or (ii) above as a result of any express or implied obligation to indemnify any other Person or as a result of any obligation under any agreement or arrangement with any other Person with respect to such amounts and including any Liability for taxes of a predecessor or transferor or otherwise by operation of Law.

“Tax Relief” means any allowance, credit, deduction, exemption or set-off in respect of any Tax or relevant to the computation of any income, profits or gains for the purposes of any Tax, or any repayment of or saving of Tax (including any repayment supplement or interest in respect of Tax), and any reference to the use or set off of Tax Relief shall be construed accordingly and shall include use or set off in part and any reference to the loss of a Tax Relief shall include the absence, non-existence or cancellation of any such Tax Relief, or to such Tax Relief being available only in a reduced amount.

“Tax Returns” means returns, estimates, amendments, information statements, elections, forms, and any attachments, appendices or addenda thereto relating to any and all Taxes.

“to the knowledge of the Company” means the knowledge of the directors and/or C-level executives of the Company and matters that any of such Persons should have known after reasonable inquiry.

“Trade Secrets” means confidential know-how, inventions, discoveries, concepts, ideas, methods, processes, designs, formulae, technical data, source code, drawings, specifications (including logic specifications), data bases, data sheets, customer lists, customer data and other confidential information that constitute trade secrets under applicable Law, in each case excluding any rights in respect of any of the foregoing that comprise Copyrights.

“Trademarks” means trademarks and registrations and applications therefor.

“TSE” means Taiwan Stock Exchange Corp.

“USA” means the United States of America.

In addition to the terms defined above, the terms listed below are defined in the sections set forth opposite such defined term.

 

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Dissenting SharesSection 3.6

Filing PartySection 6.6(c)

Lease AgreementsSection 4.20(b)

Leased Real PropertySection 4.20(b)

Material ContractsSection 4.14(a)

M&A ActRecitals

NotificationSection 6.5(a)

Outside DateSection 8.1(e)

Owned Real PropertySection 4.20(a)

Party / PartiesPreamble

Payment FundSection 3.3(a)

Pre-Closing PeriodSection 6.1(a)

Real PropertySection 4.20(b)

RepresentativesSection 6.2(b)

Share SwapRecitals

Share Swap Record DateSection 2.2

SharesRecitals

Significant CustomersSection 4.23

Significant SupplierSection 4.24

Stock AgentSection 3.3(a)

TaiCoSection 3.2(a)

Section 1.2Interpretation

.  When a reference is made in this Agreement to a Section, Article or Exhibit, such reference shall be to a Section, Article or Exhibit of this Agreement unless otherwise indicated.  The table of contents and headings contained in this Agreement or in any Exhibit are for convenience of reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.  All words used in this Agreement will be construed to be of such gender or number as the circumstances require.  Any capitalized terms used in any Exhibit but not otherwise defined therein shall have the meaning set forth in this Agreement.  All Exhibits annexed hereto or referred to herein are hereby incorporated in and made a part of this Agreement as if set forth herein unless otherwise indicated.  The words “include,” “includes” and “including” and words of similar import when used in this Agreement will mean “include, without limitation,” “includes,

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without limitation” or “including, without limitation,” unless otherwise specified.  The words “hereof,” “herein” and “hereunder” and words of like import used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement.  The term “or” is not exclusive and has the meaning represented by the phrase “and/or.”  The word “extent” in the phrase “to the extent” means the degree to which a subject or other theory extends and such phrase shall not mean “if.”  Reference herein to “default under,” “violation of” or other expression of similar import shall be deemed to be followed by the phrase “with or without notice or lapse of time, or both.”  All references to time shall refer to Taiwan time and references to “months” and “years” shall refer to the Gregorian calendar.  When calculating the period of time before which, within which or following which any act is to be done or step taken pursuant to this Agreement, the date that is the reference date in calculating such period will be excluded.  If the last day of such period is a non-Business Day, the period in question will end on the next succeeding Business Day.  Any agreement or instrument defined or referred to herein, or in any agreement or instrument that is referred to herein, means such agreement or instrument as from time to time amended, modified or supplemented in accordance with such agreement’s or instrument’s terms.  The Parties have participated jointly in the negotiation and drafting of this Agreement.  In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the Parties and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any provisions of this Agreement.

Article II
SHARE SWAP

Section 2.1Share Swap

.  Upon the terms and subject to the satisfaction or, to the extent permitted by applicable Law, waiver of the conditions set forth in this Agreement and in accordance with applicable Law, at the Share Swap Record Date, the Company shall be acquired by Buyer to become a wholly-owned Subsidiary of Buyer.

Section 2.2Closing

.  The closing of the Share Swap (the “Closing”) shall take place as soon as practicable but in no event later than five (5) Business Days following the satisfaction or, to the extent permitted by applicable Law, waiver of the conditions set forth in Article VII (other than those conditions that by their terms are to be satisfied at the Closing, but subject to the satisfaction or, to the extent permitted by applicable Law, waiver of those conditions), at the offices of Jones Day at 8F, No. 2 Dunhua S. Rd., Sec. 2, Taipei, unless another date, time or place is agreed to in writing by Buyer and the Company.  The date on which the Closing occurs is referred to in this Agreement as the “Share Swap Record Date”.  Subject to all terms and conditions contained in this Agreement, the Parties tentatively expect the Share Swap Record Date to occur on or around April 1, 2020.

Section 2.3Effects of Share Swap

.  The Share Swap shall have the effects set forth in this Agreement and in the relevant provisions of applicable Law, including the M&A Act.

Section 2.4Articles of Incorporation; Share Capital

.

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Section 2.5Directors and Supervisors

.  The directors and supervisors of Buyer immediately prior to the Share Swap shall remain unchanged as a result of the Closing.  Upon Closing, the directors and supervisors of the Company shall be discharged and replaced by such Persons as Buyer may designate, in its sole discretion.

Article III
CONSIDERATION; PAYMENT

Section 3.1Consideration

.

Section 3.2Share Swap Entity of Buyer.

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Section 3.3Payment

.

Section 3.4Withholding Rights

.  Buyer shall be entitled to deduct and withhold from the consideration otherwise payable to any holder of the Shares pursuant to this Agreement such amounts as may be required to be deducted and withheld pursuant to applicable Law in respect of securities transaction Taxes.  To the extent that amounts are so withheld and paid over to the appropriate taxing authority by Buyer (through the Stock Agent), such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the Person in respect of which such deduction and withholding was made.  The Stock Agent shall make available, upon request by any seller of Shares, all receipts of payment of the foregoing amounts withheld and treated as having been paid to such seller.

Section 3.5Fractional Shares

.  Since the Consideration to be paid in the Share Swap will be in cash, the Parties agree that this Agreement does not provide the procedure for dealing with fractional shares to be issued to the Company Shareholders.

Section 3.6Dissenting Shares

.  

Notwithstanding anything in this Agreement to the contrary, Shares issued and outstanding immediately prior to the Share Swap Record Date that are held by any holder who has exercised such holder’s appraisal rights pursuant to the Taiwan Company Act (the “Company Act”) and the M&A Act (currently, a holder must,

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either prior to or during the Company Shareholders Meeting, object in writing or object orally (which objection has been recorded by the Company), to the Share Swap and waive such holder’s voting right) and who is entitled to demand and properly demands the Company, by written notice delivered to the Company within twenty (20) days following the Company Shareholders Meeting and stating the proposed price for the sale of such holder’s Shares, to buy back Shares of such holder at the fair market price (the “Appraisal,” and such Shares, “Dissenting Shares,” and each holder of Dissenting Shares, a “Dissenting Shareholder”), shall not have the right to receive any portion of the Consideration.  Dissenting Shares shall be treated in accordance with the M&A Act and the Company Act.  Following the Company Shareholders Meeting, the Company shall promptly notify Buyer of any demands for Appraisal of any Shares, attempted withdrawals of such notices or demands and any other instruments received by the Company relating to rights to Appraisal, and to the extent permitted by applicable Law, Buyer shall have the right to participate in all negotiations and proceedings with respect to such demands.  Prior to the Share Swap Record Date, the Company shall not, without the prior written consent of Buyer, make any payment with respect to, settle or offer to settle, or approve any withdrawal of any such demands; provided, however, that the Company shall have the right to make any payment (i) with respect to, settle or offer to settle, or approve any withdrawal of any such demands, in each case at a per Share price up to but not more than the Consideration, or (ii) at a per Share price determined by a final, non-appealable Order of a court having jurisdiction over the matter in accordance with applicable Law.  Notwithstanding anything to the contrary herein, the consummation of the Share Swap shall take place on the Share Swap Record Date irrespective of whether (A) the Company and any Dissenting Shareholder have reached an agreement on the buyback of Dissenting Shares, (B) there is any pending Legal Proceeding between the Company and any Dissenting Shareholder related to buy back of Dissenting Shares and (C) the Company has yet to buy back any and all Dissenting Shares.

Section 3.7Adjustment of Consideration

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(i)the Company undergoes any stock split, stock and/or cash dividend, reorganization, recapitalization, subdivision, reclassification, combination, exchange of shares or other similar transaction with respect to the outstanding Shares;

(ii)a Change in the Company Group’s financial or business conditions that has a Material Adverse Effect;

(iii)except for any transaction expressly contemplated by this Agreement between the Effective Date and the Share Swap Record Date, any member of the Company Group disposes any of its major assets materially and adversely affecting the Company Group’s financial or business conditions, taken as a whole; or

(iv)a Governmental Entity requires, pursuant to a final, non-appealable Order in accordance with applicable Law, that an adjustment to the Consideration shall be made, or an adjustment to the Consideration is necessary in order to obtain the relevant approvals from such Government Entity.

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Article IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY

Except as set forth in the disclosure letter dated as of the Effective Date and delivered by the Company to Buyer prior to the execution and delivery of this Agreement (the “Company Disclosure Letter”), which expressly identifies the Section (or, if applicable, subsection) to which such exception relates, the Company represents and warrants to Buyer as follows:

Section 4.1Organization, Standing and Power

.

Section 4.2Subsidiaries

.

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Section 4.3Capital Stock

.

Section 4.4Authority

.  The Company has all necessary corporate power and authority to execute and deliver this Agreement, to perform its obligations hereunder and, subject, in the case of the Share Swap, delisting of the Shares and withdrawal of the public reporting status of the Company, to the adoption and approval of this Agreement and the Share Swap by the affirmative vote of the holders representing two-thirds (2/3) of the outstanding Shares entitled to vote on such matter at the Company Shareholders Meeting in accordance with applicable Law (the “Company Shareholder Approval”), to consummate the transactions contemplated hereby.  The execution, delivery and performance of this Agreement by the Company and the consummation by the Company of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part

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of the Company and no other corporate proceedings on the part of the Company are necessary to approve this Agreement or to consummate the transactions contemplated hereby, subject, in the case of the consummation of the Share Swap, delisting of Shares and withdrawal of the public reporting status of the Company, to obtaining the Company Shareholder Approval.  This Agreement has been duly executed and delivered by the Company and, assuming the due authorization, execution and delivery by Buyer, constitutes a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms (except to the extent that enforceability may be limited by applicable bankruptcy, insolvency, moratorium, reorganization or similar Laws affecting the enforcement of creditors’ rights generally or by general principles of equity).

Section 4.5No Conflict

.  Except as set forth in Section 4.5 of the Company Disclosure Letter, the execution, delivery and performance of this Agreement by the Company, and the consummation by the Company of the transactions contemplated hereby, do not and will not (i) conflict with or violate the Organizational Documents of the Company, (ii) assuming that all consents, approvals and authorizations contemplated by clauses (i) through (iv) of Section 4.6 have been obtained and all filings described in such clauses have been made, conflict with or violate any Law or any Order of any Governmental Entity, in each case that is applicable to the Company or by which any of its properties are bound, (iii) (A) result in any material breach of or constitute a material default (or an event that with notice or lapse of time or both would become a material default), (B) impair the Company’s rights or alter the rights or obligations of any third party under, (C) give to any third party any rights of termination, amendment, payment, acceleration or cancellation of or (D) result in the creation of a Lien on any of the properties or assets (including intangible assets) of the Company pursuant to, any permit, franchise or Contract to which the Company is a party or by which the Company or any of its properties is bound or affected, (iv) give rise to or result in any Person having, or having the right to exercise, any preemptive rights, rights of first refusal, rights to acquire or similar rights with respect to any capital stock of the Company or any of its Assets or properties, except in the case of the preceding clauses (iii) and (iv) as would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

Section 4.6Consents

.  The execution, delivery and performance of this Agreement by the Company, and the consummation by the Company of the transactions contemplated hereby, do not and will not require any consent, approval, Order, license, authorization or permit of, action by, filing, registration or declaration with or notification to, any Governmental Entity, except for (i) the Regulatory Approvals, (ii) such filings as required under applicable securities and corporation Laws, (iii) the filings required under the applicable requirements of antitrust or other competition Laws, investment Laws relating to foreign ownership, and all other Laws that are designed or intended to prohibit, restrict or regulate actions having the purpose or effect of monopolization or restraint of trade or lessening of competition through merger or acquisition (“Antitrust Laws”) and (iv) any other consent, approval, authorization, permit, action, filing or notification the failure of which to make or obtain would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

Section 4.7Certain Information

.

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Section 4.8No Undisclosed Liabilities

.  Except as reflected in the Company’s audited consolidated balance sheet as at June 30, 2019 (the “Company Balance Sheet”), the Company Group does not have any material Liabilities other than (i) Liabilities incurred since the date of the Company Balance Sheet in the Ordinary Course of Business and (ii) Liabilities under this Agreement or incurred in connection with the transactions contemplated hereby.

Section 4.9Absence of Certain Changes

.  Except as set forth in Section 4.9 of the Company Disclosure Letter, since June 30, 2019 and until the Effective Date, the Company Group has conducted its business and operations in the Ordinary Course of Business and there has not been (i) any Material Adverse Effect or (ii) any action or event that would have required the consent of Buyer pursuant to Section 6.1 had such action or event occurred after the Effective Date.

Section 4.10Compliance with Laws; Permits

.

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Section 4.11Legal Proceedings; Orders

.  Except as set forth in Section 4.11 of the Company Disclosure Letter, there are no material pending Legal Proceedings (other than Legal Proceedings arising from or relating to the Share Swap or any of the other transactions contemplated by this Agreement), pending, or to the knowledge of the Company, threatened, against any member of the Company Group or any of the Company Group members’ respective properties or assets.  None of the Company Group members is subject to any outstanding Order of any Governmental Entity that would prevent or materially delay the consummation of the transactions contemplated by this Agreement.  There has not been nor are there currently (nor, to the knowledge of the Company, are there currently contemplated to be) any internal official investigations or inquiries being conducted by the Company, the Company Board (or any committee thereof) or any third party at the request of any of the foregoing concerning any financial, accounting, tax, conflict of interest, self-dealing, fraudulent or deceptive conduct or other misfeasance or malfeasance issues.

Section 4.12Certain Business Practices

.  Since the date five (5) years prior to the Effective Date, (i) the Books and Records accurately and fairly reflect, in reasonable detail, all transactions and dispositions of funds or assets and (ii) there have been no false or fictitious entries made in the Books and Records relating to any illegal payment or secret or unrecorded fund.

Section 4.13Restrictions on Business Activities

.  Except as set forth in Section 4.13 of the Company Disclosure Letter, none of the Company Group members is a party to, and no asset of the Company Group that is material to the Company Group is bound by, any Contract (excluding, for the avoidance of doubt, any Contracts that have terminated, expired or there are otherwise no ongoing obligations of any party thereunder), Order or decree that: (i) restricts in any material respect or prohibits a Company Group member from (A) competing with any other Person, (B) acquiring any product or other asset or any services from any other Person, (C) developing, selling, supplying, distributing, offering, supporting or servicing any product, technology or other assets to or for any other Person, (D) performing services for any other Person or (E) engaging in a material aspect of the Company Group’s business anywhere in the world, with any Person, or during any period of time; or (ii) grants a right of first refusal, first offer or similar right with respect to a material asset or material aspect of the Company Group’s business.

Section 4.14Contracts and Commitments

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(i)that (A) is an indenture, credit agreement, loan agreement, collateral agreement to any loan, guarantee, note, mortgage or other agreement providing for indebtedness for borrowed money which exceeds NT$50,000,000 (or the equivalent in

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another currency) during any 12-month period or (B) creates any obligation under any interest rate, currency or commodity derivatives or hedging transaction;

(ii)that is a Lease Agreement material to the operation of the Company Group;

(iii)relating to a joint venture, joint development, partnership, consortium or similar Contract with any third Person that is material to the business of the Company Group;

(iv)with Significant Customers;

(v)with Significant Suppliers;

(vi)with any related Person not otherwise disclosed in the Company Financial Statements or in the Company Public Reports;

(vii)that is a settlement, conciliation or similar agreement (A) that materially restricts any Company Group member from undertaking its business as currently conducted or (B) that would require a Company Group member to pay consideration of more than NT$30,000,000 after the Effective Date;

(viii)that purports to grant a license to any Intellectual Property Rights held by any upstream Affiliate of the Company Group (including a license that would come into effect as a result of or in connection with the consummation of the Share Swap);

(ix)with (A) any of the five (5) highest paid employees or officers of the Company Group (based on total remuneration for fiscal year 2018); (B) any current employee, officer, director or supervisor of the Company Group who is entitled, in connection with the transactions contemplated by this Agreement (either alone or in connection with additional or subsequent events), to a bonus, retention bonus, severance or termination pay or other benefits in the event of change in control; or (C) any former employee, officer, director or supervisor of the Company Group under which a Company Group member has continuing obligations to such Person equal to or greater than NT$3,000,000;

(x)(A) relating to the acquisition, issuance, voting, registration, sale or transfer of any securities or (B) providing any Person with any preemptive right, right of participation, right of maintenance, right of first refusal or similar right with respect to any securities of the Company, in each case other than Contracts evidencing currently outstanding stock options granted under the Company Equity Plan;

(xi)providing for any guaranty to any Person other than a Subsidiary in an amount in excess of NT$3,000,000;

(xii)that may require a Company Group member to guarantee, reimburse, pledge, defend, hold harmless or indemnify any other Person with respect to Liabilities arising out of Environmental Laws;

(xiii)that constitutes an irrevocable power of attorney or similar Contract; or

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(xiv)the breach, absence or termination of which would reasonably be expected to have a Material Adverse Effect.

Section 4.15Tax Matters

.  Except as set forth in Section 4.15 of the Company Disclosure Letter:

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Section 4.16Employee Benefit Plans; Employment and Labor Matters

.

(i)each Company Employee Plan has been established and administered in accordance with its terms and in material compliance with applicable Law, and all contributions required to be made under the terms of any Company Employee Plan have been timely made, except for failures to make any contribution that are not material; and

(ii)except as set forth in Section 4.16(b)(ii) of the Company Disclosure Letter, there is no pending Legal Proceeding (including any investigation, audit or other administrative proceeding) by any Governmental Entity or by any plan participant or beneficiary pending, or, to the knowledge of the Company, threatened, relating to the Company Employee Plans.

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Section 4.17Intellectual Property

.

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Section 4.18IT Systems

.  To the knowledge of the Company, the IT Systems are adequate and sufficient (including with respect to working condition and capacity) for the operations of the Company Group.  The Company Group (i) has taken reasonable measures to preserve and maintain the performance, security and integrity of the IT Systems (and all software, information or data stored on any IT Systems).  During the twelve (12) months  period prior to the Effective Date, (A) there has been no failure with respect to any IT Systems that has had a material and adverse effect on the operations of the Company Group taken as a whole and (B) there has been no unauthorized access to or use of any IT Systems (or any software, information or data stored on any IT Systems) that has had a material and adverse effect on the operations of the Company Group taken as a whole.

Section 4.19Personal Information

.  To the knowledge of the Company, each of the Company Group members has complied in all material respects with all applicable Law, regulatory and self-regulatory guidelines, and published interpretations by Governmental Entities of such Laws and guidelines relating to (i) the privacy of users of any website of the Company Group and (ii) the collection, use, storage, retention, disclosure and disposal of any Personal Information by or on behalf of the Company Group.  No Legal Proceedings have been brought or, to the knowledge of the Company, threatened against any of the Company Group members alleging a violation of any Person’s privacy, personal or confidentiality rights.

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Section 4.20Real Property

.

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Section 4.21Environmental Matters

.

Section 4.22Insurance

.  Section 4.22 of the Company Disclosure Letter sets forth a complete and accurate list of all insurance policies held by or applicable to the Company Group members including, in respect of each such policy, the policy name, policy number and carrier term, type and amount of coverage and annual premium, and the names of the insurers.  To the knowledge of the Company, no event has occurred, including the failure by a Company Group member to give any notice or information or a Company Group member giving any inaccurate or erroneous notice or information, which limits or impairs the rights of the Company under any such insurance policies.

Section 4.23Significant Customers

.  Section 4.23 of the Company Disclosure Letter sets forth an accurate and complete list of the ten (10) largest customers of the Company Group for the year ended December 31, 2018, based on amounts paid or payable for such period (each, a “Significant Customer”).  As of the Effective Date, none of Company Group members has received any written notice from any Significant Customer that such customer intends to terminate or materially modify existing Contracts with such Company Group member.

Section 4.24Significant Suppliers

.  Section 4.24 of the Company Disclosure Letter sets forth an accurate and complete list of the ten (10) largest suppliers of goods and/or services to the Company Group for the year ended December 31, 2018, based on amounts paid or payable for such period (each, a “Significant Supplier”).  As of the Effective Date, none of the Company Group members has received any written notice from any Significant Supplier that such customer intends to terminate or materially modify existing Contracts with such Company Group member.

Section 4.25Books and Records

.  The minute books of each the Company, all of which have been made available to Buyer, contain true, correct and complete records in all material respects of all meetings held by, and corporate action taken by, the shareholders and

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the Company Board (and its committees).  The Company (or its Representatives or agents) have made and kept (and the Company has made available or provided to Buyer to the extent reasonably requested by Buyer in writing) business records, financial books and records, personnel records, ledgers, sales accounting records, tax records and related work papers and other books and records of the Company (the “Books and Records”).  The Books and Records have been maintained in accordance with sound business practices in all material respects.  The minute books and other Books and Records of the Company are in the possession of the Company.

Section 4.26No Broker

.  No broker, investment banker, financial advisor or other Person is entitled to any broker’s, finder’s, financial advisor’s or other similar fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of the Company.

Article V
REPRESENTATIONS AND WARRANTIES OF BUYER

Buyer represents and warrants to the Company as follows:

Section 5.1Organization, Standing and Power

.  Buyer (i) is a corporation duly organized, validly existing and, if applicable, in good standing under the Laws of the jurisdiction of its incorporation, (ii) has all requisite corporate power and authority to own, lease and operate its properties and assets and to carry on its business as now being conducted and (iii) as applicable, is duly qualified or licensed to do business and is in good standing in each jurisdiction in which the nature of its business or the ownership, leasing or operation of its properties makes such qualification or licensing necessary, except for any such failures that individually or in the aggregate would not materially prevent Buyer from consummating the transactions contemplated hereby.

Section 5.2Authority

.  Buyer has all necessary corporate power and authority to execute and deliver this Agreement, to perform its obligations hereunder, and to consummate the transactions contemplated hereby.  The execution, delivery and performance of this Agreement by Buyer and the consummation by Buyer of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of Buyer and no other corporate proceedings on the part of Buyer are necessary to approve this Agreement or to consummate the transactions contemplated hereby.  This Agreement has been duly executed and delivered by Buyer and, assuming the due authorization, execution and delivery by the Company, constitutes a legal, valid and binding obligation of Buyer, enforceable against Buyer in accordance with its terms (except to the extent that enforceability may be limited by applicable bankruptcy, insolvency, moratorium, reorganization or similar Laws affecting the enforcement of creditors’ rights generally or by general principles of equity).

Section 5.3No Conflict

.  The execution, delivery and performance of this Agreement by Buyer, and the consummation by Buyer of the transactions contemplated hereby, do not and will not (i) conflict with or violate the Organizational Documents of Buyer, (ii) assuming that all consents, approvals and authorizations contemplated in Section 5.4 have been obtained and all filings described in such clauses have been made, conflict with or violate any Law or any Order of any Governmental Entity, in each case that is applicable to Buyer or by which any of its properties are bound, (iii) (A) result in any material breach of or constitute a material default (or an event that with notice or lapse of time or both would become a material default), (B) impair Buyer’s rights or alter the rights or obligations of any

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third party under, (C) give to any third party any rights of termination, amendment, payment, acceleration or cancellation of or (D) result in the creation of a Lien on any of the properties or assets (including intangible assets) of Buyer pursuant to, any permit, franchise or Contract to which Buyer is a party or by which Buyer or any of its properties is bound or affected or (iv) give rise to or result in any person having, or having the right to exercise, any preemptive rights, rights of first refusal, rights to acquire or similar rights with respect to any capital stock of Buyer or any of its assets or properties, except in the case of the preceding clauses (iii) and (iv) as would not materially prevent Buyer from consummating the transactions contemplated hereby.

Section 5.4Consents

.  The execution, delivery and performance of this Agreement by Buyer, and the consummation by Buyer of the transactions contemplated hereby, do not and will not require any consent, approval, Order, license, authorization or permit of, action by, filing, registration or declaration with or notification to, any Governmental Entity, except for (i) the Regulatory Approvals, (ii) such filings as required under applicable securities and corporation Laws, (iii) the filings required under the applicable requirements of Antitrust Laws, (iv) such filings as are necessary to comply with the applicable requirements of the NASDAQ Global Select Market and (v) any such consent, approval, authorization, permit, action, filing or notification the failure of which to make or obtain would not materially prevent Buyer from consummating the transactions contemplated hereby.

Section 5.5Financial Ability of Buyer and TaiCo

.  Buyer shall, and shall ensure that TaiCo, have adequate financial ability to fully perform its obligations under this Agreement and to consummate the Share Swap.

Section 5.6Ownership of TaiCo

.  TaiCo will be a wholly-owned Subsidiary of Diodes Incorporated as of the Share Swap Record Date.

Section 5.7No Broker

.  No broker, investment banker, financial advisor or other Person is entitled to any broker’s, finder’s, financial advisor’s or other similar fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of Buyer.

Article VI
COVENANTS

Section 6.1Conduct of Business of the Company Pending the Share Swap

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(i)amend the Organizational Documents of any member of the Company Group;

(ii)adopt a plan of complete or partial liquidation, dissolution, merger, consolidation, restructuring, recapitalization or other reorganization, except for the Share Swap contemplated by this Agreement;

(iii)issue, deliver or sell any security of any member of the Company Group or grant any equity-based compensation award, other than the issuance of Shares by the Company to its employees upon the valid exercise of outstanding equity awards;

(iv)except for the dividends and other distributions that have been declared by the any member of the Company Group prior to the Effective Date, declare, set aside or pay any dividend or other distribution, payable in cash, stock, property or any combination thereof, with respect to any of its capital stock (except for any dividend or distribution by a Subsidiary of the Company to the Company or to other Subsidiaries);

(v)split, subdivide or reclassify its capital stock, or enter into any Contract with respect to the voting of any of the Company’s capital stock or other securities or the capital stock or other securities of a Subsidiary of the Company;

(vi)make any capital expenditure, or any commitment with respect thereto, other than in the Ordinary Course of Business;

(vii)(A) acquire (whether by merger, consolidation or acquisition of stock or assets or otherwise) any corporation, partnership or other business organization or division thereof or any material equity interest therein or (B) sell or license any material property or any assets, other than (1) sales or dispositions of inventory and other assets in the Ordinary Course of Business or (2) pursuant to Contracts in effect on the date hereof;

(viii)enter into any material joint venture or partnership;

(ix)(A) make any loans or advances to any other Person (other than to a Subsidiary of the Company or to employees of any Company Group member in the Ordinary Course of Business), (B) incur any indebtedness for borrowed money other than in the Ordinary Course of Business or issue any debt securities or (C) assume, guarantee, endorse or otherwise become liable or responsible for the obligations of another Person (other than the Company or any of its Subsidiaries);

(x)except to the extent required by applicable Law or otherwise specifically required by this Agreement, (A) increase the compensation or benefits of any current or former director, supervisor, officer or consultant of any member of the Company Group, (B) other than in the Ordinary Course of Business, increase the compensation or benefits of any current or former employee (other than an officer) of any member of the

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Company Group, (C) amend, terminate or adopt any Company Employee Plan, (D) accelerate the vesting of, or the lapsing of restrictions with respect to, any stock options or other stock-based compensation, (E) fail to make any required contributions under any Company Employee Plan, (F) hire or terminate the employment of any C-level executive of any member of the Company Group or (G) pay any compensation or remuneration to any Person for his or her service as a director or supervisor of any member of the Company Group for any period commencing on or after January 1, 2019, other than in the Ordinary Course of Business and in such amounts substantially consistent with past levels of payment;

(xi)other than in the Ordinary Course of Business, enter into, amend in any material respect or terminate (other than a termination in accordance with its terms) any Material Contract;

(xii)effectuate a layoff as defined in the Taiwan Act for Worker Protection of Mass Redundancy;

(xiii)create any Subsidiary other than WBG PowerSystems (Cayman) Co., Ltd. and Lyra Semiconductor Incorporated (芯籟半導體股份有限公司); or

(xiv)enter into any Contract obligating it to take any of the actions described in Section 6.1(b)(i) through Section 6.1(b)(xiii).

Section 6.2Acquisition Proposals

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Section 6.3Access to Information

.  At all times during the Pre-Closing Period, upon reasonable prior notice, the Company shall (and shall use reasonable best efforts to cause its Representatives to), to the extent permitted by applicable Law, afford to Buyer and its respective Representatives reasonable access without undue interruption during normal business hours, consistent with applicable Law, to the Company’s officers, employees, properties, offices, other facilities and Books and Records, and shall furnish Buyer and its Representatives with such financial, operating and other data and information as such Persons shall reasonably request in connection with the Share Swap.

Section 6.4Confidentiality

.  The Confidentiality Agreement is incorporated herein by reference.  The Confidentiality Agreement shall govern the confidentiality and non-disclosure obligations of the Parties with respect to Proprietary Information (as defined in the Confidentiality Agreement) exchanged in connection with the negotiation, preparation or execution of this Agreement or the negotiation and consummation of the transactions contemplated hereby.

Section 6.5Company Shareholders Meeting; Governance Matters

.

Section 6.6Further Actions

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Section 6.7Regulatory Approval and Antitrust Law Filings

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Section 6.8Public Announcements

.  Prior to the Company making any press release or public announcement in respect of this Agreement or the transactions contemplated by this Agreement or otherwise communicate with any news media, the Company shall provide to Buyer the draft of such press release or public announcement and allow Buyer reasonable opportunity and time to comment on such draft, and shall give due consideration to reasonable additions, deletions or changes suggested thereto by Buyer.  Prior to Buyer making any press release or public announcement in respect of this Agreement or the transactions contemplated by this Agreement or otherwise communicate with any news media, Buyer shall provide to the Company the draft of such press release or public announcement in advance.  The Parties shall cooperate as to the timing and contents of any press release, public announcement or communication.

Section 6.9Notification of Certain Matters

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Section 6.10Banking Chops

.  At the Closing on the Share Swap Record Date, the Company shall cause to be delivered to one or more authorized Representative(s) of Buyer all chops associated with all bank accounts of the Company Group members.

Article VII
CONDITIONS TO CLOSING

Section 7.1Conditions to Each Party’s Obligations to Effect the Share Swap

.  The respective obligations of each Party to effect the Share Swap are subject to the satisfaction at or prior to the Share Swap Record Date of each of the following conditions, any and all of which may be waived, in whole or in part, by Buyer and the Company, to the extent permitted by applicable Law:

Section 7.2Conditions to Buyer’s Obligations to Effect the Share Swap

.  The obligations of Buyer to effect the Share Swap are subject to the satisfaction at or prior to the Share Swap Record Date of each of the following conditions, any and all of which may be waived, in whole or in part, by Buyer in its sole discretion, to the extent permitted by applicable Law:

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(b)Performance of Covenants.  The Company shall have performed or complied in all material respects all the covenants and agreements that are required to be performed by the Company under this Agreement at or prior to the Share Swap Record Date.

Section 7.3Conditions to the Company’s Obligations to Effect the Share Swap

.  The obligations of the Company to effect the Share Swap are also subject to the satisfaction at or prior to the Share Swap Record Date of the following conditions, any and all of which may be waived, in whole or in part, by the Company in its sole discretion, to the extent permitted by applicable Law:

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Section 7.4Satisfaction and Waiver of Conditions to Closing

.  Each of the Company and Buyer, as the case may be, shall inform the other Party in writing within three (3) Business Days of becoming aware of (i) the satisfaction of any applicable condition to closing in this Article VII (each, a “Condition to Closing”) or (ii) any circumstance that has resulted, or will result, in a failure to satisfy any Condition to Closing, and shall provide due evidence of such satisfaction or failure to satisfy.

Article VIII
TERMINATION, AMENDMENT AND WAIVER

Section 8.1Termination

.  This Agreement may be terminated and the Share Swap may be abandoned at any time prior to the Share Swap Record Date, notwithstanding approval thereof by the shareholders of the Company, only as follows:

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The Party desiring to terminate this Agreement pursuant to this Section 8.1 shall give notice of such termination and the provisions of this Section 8.1 being relied on to terminate this Agreement to the other Parties.

Section 8.2Effect of Termination

.  In the event of termination of this Agreement pursuant to Section 8.1, this Agreement shall forthwith become void and have no effect, without any liability or obligation on the part of Buyer, the Company or their respective directors, officers, Affiliates or shareholders, except that the provisions of Section 6.4 (Confidentiality), Section 6.8 (Publicity), this Section 8.2 (Effect of Termination), and Article IX (General Provisions), of this Agreement shall survive the termination hereof.  Notwithstanding the foregoing, nothing contained herein shall relieve any Party of liability for an intentional breach of its covenants or agreements set forth in this Agreement prior to such termination or for fraud.

Article IX
GENERAL PROVISIONS

Section 9.1Entire Agreement

.  This Agreement, the Exhibits and other documents referred to herein contain the complete agreement between the Parties and supersede any prior understandings, agreements or representations by or between the Parties, written or oral, which may have related to the subject matter hereof in any way.

Section 9.2Severability

.  Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable Law, but if any provision of this Agreement 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.

Section 9.3Notices

.  All notices or other communications required or permitted hereunder shall reference this Agreement, shall be in writing in the English language, shall be delivered personally, by overnight courier, by electronic mail or by certified, registered or express air mail, postage prepaid, and shall be deemed given (i) when so delivered personally, (ii) when so received by courier, (iii) if given by electronic mail, when receipt of the message is confirmed to the sender by the systems of the Party to which notice is intended to be given, or (iv) if mailed, five (5) Business Days after the date of mailing, as follows:

Diodes Incorporated

4949 Hedgcoxe Rd. Suite 200

Plano, Texas 95024

USA

Attn: K.S. Lu

Email: ks_lu@diodes.com

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Lite-On Semiconductor Corp.

4F, 392 Ruiguang Rd.

Neihu Dist.

Taipei 11492, Taiwan

Attn: David Lee

Email: david.lee@liteonsemi.com

Section 9.4Amendment or Supplement

.  This Agreement may be amended, modified or supplemented by the Parties by action taken or authorized by written agreement of the Parties (by action taken by their respective boards of directors, if required) at any time prior to the Share Swap Record Date, whether before or after the Company Shareholder Approval has been obtained; provided, however, that after the Company Shareholder Approval has been obtained, no amendment shall become effective that pursuant to applicable Law requires further approval or adoption by the Company Shareholders without such further approval or adoption.  This Agreement may not be amended, modified or supplemented in any manner, whether by course of conduct or otherwise, except by an instrument in writing specifically designated as an amendment hereto, signed on behalf of each of the Parties in interest at the time of the amendment.

Section 9.5Extension of Time; Waiver

.  At any time prior to the Share Swap Record Date, the Parties may (by action taken or authorized by their respective boards of directors, if required), to the extent permitted by applicable Law, (i) extend the time for the performance of any of the obligations or acts of the Company (in the case of an extension by Buyer) or Buyer (in the case of an extension by the Company), as applicable, (ii) waive any inaccuracies in the representations and warranties of the Company (in the case of a waiver by Buyer) or Buyer (in the case of a waiver by the Company), set forth in this Agreement or any document delivered pursuant hereto or (iii) subject to applicable Law, waive compliance with any of the agreements or conditions of the Company (in the case of a waiver by Buyer) or Buyer (in the case of a waiver by the Company) contained herein; provided, however, that after the Company Shareholder Approval has been obtained, no waiver may become effective that pursuant to applicable Law requires further approval or adoption by the Company Shareholders without such further approval or adoption.  Any agreement on the part of a Party to any such waiver shall be valid only if set forth in a written instrument executed and delivered by a duly authorized officer on behalf of such Party, as applicable.  No failure or delay of any Party in exercising any right or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such right or power, or any course of conduct, preclude any other or further exercise thereof or the exercise of any other right or power.

Section 9.6No Rollover

.  None of Diodes Incorporated or any of its Subsidiaries has entered or will enter into any agreement with any director or major shareholder (as defined in the Taiwan Securities and Exchange Act) of the Company that provides for a shareholder rollover or similar arrangement in connection with the Share Swap.

Section 9.7Successors and Assigns

.  This Agreement and all of the provisions hereof shall be binding upon and inure to the benefit of the Parties and their respective successors and permitted assigns.  This Agreement, and all of Buyer’s rights, interests and obligations hereunder may be assigned or delegated by Buyer to TaiCo in accordance with

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Section 3.2; provided, that no such assignment or delegation shall relieve Buyer of its obligations hereunder.  Except as set forth in the immediately preceding sentence, this Agreement may not be assigned, nor the rights or obligations of any Party transferred or delegated to any other Person without the prior written consent of the other Party.

Section 9.8Rights Cumulative

.  Each and all of the various rights, powers and remedies of a Party will be considered to be cumulative with and in addition to any other rights, powers and remedies which such Party may have at law or in equity in the event of the breach of any of the terms of this Agreement.  The exercise or partial exercise of any right, power or remedy will neither constitute the exclusive election thereof nor the waiver of any other right, power or remedy available to such Party.

Section 9.9Governing Law

.  All issues and questions concerning the construction, validity, interpretation and enforceability of this Agreement and the Exhibits hereto shall be governed by, and construed in accordance with, the laws of Taiwan, without giving effect to any choice of law or conflict of law rules or provisions that would cause the application of the laws of any jurisdiction other than the Taiwan.

Section 9.10Dispute Resolution

.

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Section 9.11Expenses

.  Except as may otherwise be agreed to hereunder or in other writing by the Parties, all fees and expenses incurred in connection with this Agreement, the Share Swap and the other transactions contemplated hereby shall be borne and timely paid by the Party incurring such fees or expenses, whether or not the Share Swap is consummated.

Section 9.12Currency

.  All references to “NT$” in this Agreement refer to New Taiwan Dollars.

Section 9.13Counterparts

.  This Agreement may be executed in multiple counterparts, any one of which need not contain the signature of more than one Party, but all such counterparts taken together shall constitute one and the same instrument.

Section 9.14Delivery by Electronic Transmission

.  This Agreement and any signed agreement entered into in connection herewith or contemplated hereby, and any amendments hereto or thereto, to the extent signed and delivered by means of a facsimile machine or by .pdf, .tif, .gif, .jpeg or similar attachment to electronic mail, shall be treated in all manner and respects as an original contract and shall be considered to have the same binding legal effects as if it were the original signed version thereof delivered in person.  At the request of a Party to any such contract, the other Party shall re-execute original forms thereof and deliver them to the requesting Party.  No Party to any such contract shall raise the use of a facsimile machine or by .pdf, .tif, .gif, .jpeg or similar attachment to electronic mail to deliver a signature or the fact that any signature or contract was transmitted or communicated through the use of facsimile machine or by .pdf, .tif, .gif, .jpeg or similar attachment to electronic mail as a defense to the formation of a contract and such Party forever waives any such defense.

[Signature page follows]

 

 

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IN WITNESS WHEREOF, the Parties have executed this Agreement on the date first written above by.

 

DIODES INCORPORATED

 

 

LITE-ON SEMICONDUCTOR CORP.

 

 

 

 

 

 

[Signature Page to Share Swap Agreement]

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EXHIBIT A

 

Share Capital on Share Swap Record Date

 

 

 

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EXHIBIT B

 

Third Party Consents of the Company

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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Company Disclosure Letter to the Share Swap Agreement

 

 

Reference is made to the Share Swap Agreement (the “Agreement”) dated as of August 8, 2019 by and between Diodes Incorporated, a company incorporated and in existence under the laws of the State of Delaware, USA and having its principal place of business at 4949 Hedgcoxe Rd., Suite 200, Plano, Texas, USA (“Buyer”) and Lite-On Semiconductor Corp., a company incorporated and in existence under the laws of Taiwan with uniform commercial number of 23528103 and having its registered address at 4F. No. 392, Ruiguang Rd., Neihu Dist., Taipei, Taiwan (the “Company”).Capitalized terms used herein but not otherwise defined shall have the respective meanings assigned to such terms in the Agreement.

 

The Company Disclosure Letter is being delivered by the Company pursuant to the Agreement and qualifies the representations and warranties of the Company by reference to specific provisions in Article IV of the Agreement. Each exception set forth in the Company Disclosure Letter is identified by reference to, or has been grouped under a heading referring to, a specific individual section or subsection of the Agreement; provided, however, that the inclusion of any item referenced in one section or subsection of the Company Disclosure Letter shall be deemed to refer to any other section or subsection of the Company Disclosure Letter, whether or not an explicit cross-reference appears, if the applicability of such item to the other section or subsection is reasonably apparent on its face without reference to underlying documents therein. The inclusion of any information in the Company Disclosure Letter shall not be deemed to be an admission or evidence of the materiality of such item, nor shall it establish a standard of materiality for any purpose whatsoever. Matters reflected in the Company Disclosure Letter are not necessarily limited to matters required by the Agreement to be disclosed in the Company Disclosure Letter. Neither the specification of any dollar amount in the representations and warranties contained in the Agreement nor the inclusion of any specific item in the Company Disclosure Letter is intended to imply that such amounts, higher or lower amounts, the items so included, or other items, are or are not material, and no Party shall use the fact of the setting of such amounts or the fact of the inclusion of any such item in the Company Disclosure Letter in any dispute or controversy between the Parties as to whether any obligation, item or matter is or is not material, or may constitute an event or condition which could be considered to have a Material Adverse Effect.

 

 

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Company Disclosure Letter Sections

 

Section 4.2(a) – Company Group Chart Section 4.2(b) – Subsidiaries

Section 4.3(e) – Future Investments

Section 4.5 – No Conflict

Section 4.9 – Absence of Certain Changes

Section 4.10(c) – Material Violation of Permits Section 4.11 – Legal Proceedings

Section 4.13 – Restriction on Business Activities Section 4.14(a) – Material Contracts

Section 4.15 – Tax Matters

Section 4.16(a) – Company Employee Plans

Section 4.16(b)(ii) – Legal Proceedings Relating to Company Employee Plans Section 4.16(d) – Compliance with Labor Laws

Section 4.17(a) – Intellectual Property Not Wholly-Owned by the Company Group Section 4.17(c) – Legal Proceedings Relating to Intellectual Property

Section 4.17(d) – Violations of Employee Confidentiality Obligations Section 4.17(e) – Company Registered Intellectual Property

Section 4.17(f) – Orders Relating to Company Intellectual Property Rights Section 4.17(g) – Material Violations of Company IP Licenses

Section 4.20(a) – Owned Real Property

Section 4.20(a)(A) – Marketable Title to Owned Real Property

Section 4.20(b) – Leased Real Property

Section 4.21(a) – Environmental Law Compliance

Section 4.21(b) – Environmental Permits

Section 4.21(c) – Legal Proceedings Relating to Environmental Law

Section 4.22 – Insurance

Section 4.23 – Significant Customers

Section 4.24 – Significant Suppliers

 

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Section 4.2(a) – Company Group Chart

 

 

敦南科技股份有限公司

Lite-On Semiconductor Corp. (TWN)

(簡稱: LSC)

 

100%

 

Smart Power Holdings Group Co., Ltd.  (BVI)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

備註：有新設兩子公司(如下)，目前尚未注資。

 

 

1. Lite-On Semiconductor America Inc.(2017.09設立；預計資本額20萬美金；LSC100%

 

 

持有)

 

1

 

 

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2. WBG PowerSystem (Cayman) Co., Ltd.(寬頻芯科技(開曼)有限公司) (預計資本額300萬

 

2

 

 

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美金；LSC持有65%)

 

 

3. 上述紅框內為昂寶暨其所屬下轄公司，不屬於本交易所定義之子公司。

 

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Section 4.2(b) – Subsidiaries

 

MARKETABLE SECURITIES HELD:

 

4

 

 

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NAME OF INVESTEES OVER WHICH THE PARENT COMPANY EXERCISES SIGNIFICANT INFLUENCE:

(Amounts in Thousands of New Taiwan Dollars or Thousands of Foreign Currencies)

 

 

5

 

 

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INFORMATION ON INVESTMENT IN MAINLAND CHINA:

 

 

(Amounts in Thousands of New Taiwan Dollars or Thousands of Foreign Currencies)

 

 

6

 

 

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Note : 依據敦南科技公告財務報告之附表分類表達

 

Note : The investment information list was followed the classification of financial report.

 

7

 

 

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Section 4.3(e) – Future Investments

 

 

8

 

 

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Section 4.5 – No Conflict

 

Nil

 

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Section 4.9 – Absence of Certain Changes

 

公司於2019年07月底向芯籟半導體(股)公司發出投資意向書，擬藉由參予該公司現金增 資方式，取得50%股權，股數約20,400,000股，每股金額10元。

 

10

 

 

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Section 4.10(c) – Material Violation of Permits

 

 

敦南科技(股)公司

 

 

 

敦南微電子(無錫)有限公司

 

 

 

上海旭福電子有線公司

 

 

 

敦南科技(無錫)有限公司

 

 

10

 

 

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Section 4.11 – Legal Proceedings

 

(1)Any memoranda of counsel with respect to pending or threatened litigation during last 3 years.

 

 

 

(2)A schedule of all proceedings by the Company presently pending, or which the Company intends to initiate against any person or company.

 

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Section 4.13 – Restriction on Business Activities