AGREEMENT AND PLAN OF MERGER

Exhibit 2.1

Execution Copy

AGREEMENT AND PLAN OF MERGER

T HIS A GREEMENT AND P LAN OF M ERGER (“ Agreement ”) is made and entered into as of August 1, 2008, by and among, C YPRESS S EMICONDUCTOR C ORPORATION , a Delaware corporation (“ Parent ”); Copper Acquisition Corporation, a Delaware corporation and a wholly owned subsidiary of Parent (“ Acquisition Sub ”); and S IMTEK C ORPORATION , a Delaware corporation (the “ Company ”). Certain capitalized terms used in this Agreement are defined in Exhibit A .

R ECITALS

A. It is proposed that Acquisition Sub make a tender offer to acquire all of the issued and outstanding Company Shares at a price of $2.60 per Company Share (the “ Per Share Amount ”), net to the holder thereof in cash, all upon the terms and subject to the conditions set forth in this Agreement. (Such tender offer, as it may be amended from time to time, is referred to in this Agreement as the “ Offer .”)

B. It is further proposed that, after the acceptance for payment of Company Shares tendered pursuant to the Offer, Acquisition Sub merge with and into the Company, and each Company Share that is not tendered and accepted for payment pursuant to the Offer will thereupon be cancelled and converted into the right to receive the Per Share Amount upon the terms and subject to the conditions set forth in this Agreement (the merger of Acquisition Sub into the Company being referred to in this Agreement as the “ Merger ”).

C. Each of the Boards of Directors of Parent, Acquisition Sub and the Company has (i) determined that this Agreement is advisable, (ii) determined that this Agreement and the transactions contemplated hereby, including the Offer and the Merger, are at a price and on terms that are in the best interests of their respective stockholders and (iii) approved this Agreement and the transactions contemplated hereby, including the Offer and the Merger, all upon the terms and subject to the conditions set forth herein.

D. Concurrently with the execution and delivery of this Agreement, and as a material inducement to Parent to enter into this Agreement, certain stockholders of the Company are executing and delivering Transaction Support Agreements in favor of Parent and Acquisition Sub (the “ Transaction Support Agreements ”).

E. Concurrently with the execution and delivery of this Agreement, and as a material inducement to Parent to enter into this Agreement, certain key employees are entering into offer letters with Parent.

F. Concurrently with the execution and delivery of this Agreement, and as a condition and inducement to Parent and Sub to enter into this Agreement, the Selected Stockholder is entering into a Non-Competition Agreement with Parent.

G. For U.S. federal income tax purposes, the parties to this Agreement will treat the Offer and the Merger as integrated transactions that result in Parent’s taxable acquisition of all of the issued and outstanding Company Shares in exchange for the Per Share Amount.

A GREEMENT

In consideration of the foregoing premises and the representations, warranties, covenants and agreements set forth herein, as well as other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged and accepted, and intending to be legally bound hereby, Parent, Acquisition Sub and the Company hereby agree as follows:

SECTION 1. THE OFFER

1.1 Tender Offer.

(a) Provided that this Agreement shall not have been previously terminated in accordance with Section 7 , as promptly as practicable, but in any event within ten business days after the date of this Agreement (unless the Company is not prepared to file the Schedule 14D-9 with the SEC on the same day that Parent and Acquisition Sub are prepared to commence (within the meaning of Rule 14d-2 under the Exchange Act) the Offer, in which event Parent and Acquisition Sub shall not be required to commence the Offer until the Company is prepared to file the Schedule 14D-9 with the SEC), Acquisition Sub shall commence (within the meaning of Rule 14d-2 under the Exchange Act) the Offer for all of the outstanding Company Shares, at a price per Company Share equal to the Per Share Amount (subject to the terms of Section 1.1(f) ). (The date on which Acquisition Sub commences the Offer, within the meaning of Rule 14d-2 under the Exchange Act, is referred to in this Agreement as the “ Offer Commencement Date .”). The obligation of Acquisition Sub to accept for payment Company Shares tendered pursuant to the Offer shall be subject only to the satisfaction or waiver of each of the conditions set forth in Annex I (the “ Offer Conditions ”) (and shall not be subject to any other conditions).

(b) Subject to the terms and conditions of this Agreement, Acquisition Sub shall (and Parent shall cause Acquisition Sub to) accept for payment and pay for all Company Shares tendered pursuant to the Offer (and not validly withdrawn) as promptly as practicable after the expiration date of the Offer (as it may be extended pursuant to Section 1.1(d) ). The Per Share Amount payable in respect of each Company Share validly tendered and not withdrawn pursuant to the Offer shall be paid net to the holder thereof in cash, subject to Section 1.1(g) .

(c) Parent and Acquisition Sub expressly reserve the right to increase the Per Share Amount or to make any other changes in the terms and conditions of the Offer; provided, however , that unless previously approved by the Company in writing, neither Parent nor Acquisition Sub shall:

(i) change or waive the Minimum Condition (as defined in Annex I );

(ii) decrease the number of Company Shares sought to be purchased in the Offer;

(iii) subject to Section 1.1(f) , reduce the Per Share Amount;

 

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(iv) extend the expiration date of the Offer (other than pursuant to and in accordance with Section 1.1(d) );

(v) change the form of consideration payable in the Offer;

(vi) impose any condition to the Offer in addition to the Offer Conditions; or

(vii) amend, modify or supplement the conditions to the Offer set forth in Annex I hereto so as to broaden the scope of such conditions to the Offer or otherwise in a manner that materially and adversely affects the terms or conditions on which holders of Company Shares may participate in the Offer.

(d) Subject to the terms and conditions of this Agreement and the Offer, the Offer shall expire at midnight, Eastern time, on the date that is twenty (20) business days (for this purpose calculated in accordance with Section 14d-1(g)(3) under the Exchange Act) after the Offer Commencement Date; provided, however , that notwithstanding the foregoing or anything to the contrary set forth in this Agreement, (i) Acquisition Sub shall extend the Offer for any period required by any rule, regulation, interpretation or position of the SEC or its staff or the Nasdaq that is applicable to the Offer, (ii) in the event that any of the conditions to the Offer, including the Minimum Condition and the other conditions set forth on Annex I hereto, are not satisfied or waived as of any then scheduled expiration date of the Offer, Acquisition Sub shall, at the request of the Company or may, at its option, extend the Offer for one (1) successive ten (10) Business Day period in order to permit the satisfaction of such conditions to the Offer, after which ten (10) Business Day period, Acquisition Sub may (but shall not be required to) extend the Offer for one (1) or more successive extension periods of ten (10) Business Days each in order to permit the satisfaction of the conditions to the Offer; (iii) in the event that the condition to the Offer set forth in clause 2 of Annex I hereto is not satisfied or waived as of any then scheduled expiration date of the Offer, but all of the other conditions to the Offer set forth on Annex I hereto (other than the condition to the Offer set forth in clause 3 of Annex I hereto, and other than the condition set forth in clause 4(e)(ii) of Annex I hereto to the extent arising out of the same group of facts and circumstances that have led to the failure of the condition to the Offer set forth in clause 2 of Annex I hereto to be satisfied) shall have been satisfied or waived on or prior to such time, then Acquisition Sub shall extend the Offer for successive ten (10) Business Day periods each in order to permit the satisfaction of such condition to the Offer; (iv) in the event that (A) the Minimum Condition has been satisfied, (B) there is a breach of a covenant of the Company or an inaccuracy in a representation or warranty of the Company, in either case such that one or more of the conditions set forth in clause 4(a) or clause 4(b) of Annex I hereto have not been satisfied or waived as of any then scheduled expiration date of the Offer and (C) the breach or inaccuracy is capable of being cured within twenty (20) calendar days after delivery of written notice from Parent to the Company of such breach or inaccuracy, then, Acquisition Sub shall, at the request of the Company, extend the Offer for one (1) or more successive extension periods of up to ten (10) Business Days each in order to permit the satisfaction of such conditions to the Offer, with the last such extension period ending not earlier than the date on which Parent would be entitled to terminate this Agreement pursuant to Section 7.1(f)(i) on account of such breach or inaccuracy, and (v) in the event that all of the conditions to the Offer set forth in Annex I , except the Minimum Condition, are satisfied or waived as of any

 

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then scheduled expiration date of the Offer, Acquisition Sub shall, at the request of the Company or may, at its option, extend the Offer for one (1) successive ten (10) Business Day period in order to permit the satisfaction of the Minimum Condition, after which ten (10) Business Day period, Acquisition Sub may (but shall not be required to) extend the Offer for one (1) or more successive extension periods of ten (10) Business Days each in order to permit the satisfaction of the Minimum Condition; provided, however , that notwithstanding the foregoing clauses (ii) - (v) of this Section 1.1(d) , inclusive, in no event shall Acquisition Sub be required to extend the Offer beyond the Termination Date; and provided further , that the foregoing clauses (ii) - (v) of this Section 1.1(d) , inclusive, shall not be deemed to impair, limit or otherwise restrict in any manner the right of Parent or the Company to terminate this Agreement pursuant to the terms of Section 7 hereof.

(e) Acquisition Sub may (but shall not be required to), in its discretion, elect to provide for a subsequent offering period in accordance with Rule 14d-11 under the Exchange Act of not less than three (3) nor more than twenty (20) Business Days, which subsequent offering period shall commence immediately following the Acceptance Time. Subject to the terms and conditions of this Agreement and the Offer, Acquisition Sub shall (and Parent shall cause Acquisition Sub to) accept for payment, and pay for, all Company Shares validly tendered and not withdrawn pursuant to the Offer as so extended by such subsequent offering period, as promptly as practicable after any such Company Shares are tendered during such subsequent offering period. The Per Share Amount payable in respect of each Company Share validly tendered and not withdrawn pursuant to the Offer, as so extended by such subsequent offering period, shall be paid net to the holder thereof in cash, subject to reduction only for any applicable U.S. federal withholding or back-up withholding or other Taxes payable by such holder.

(f) If, between the date of this Agreement and the Acceptance Time, the outstanding Company Shares are changed into a different number or class of shares by reason of any stock split, division or subdivision of shares, stock dividend, reverse stock split, consolidation of shares, reclassification, recapitalization or other similar transaction, then the Per Share Amount shall be adjusted to the extent appropriate.

(g) Each of Acquisition Sub, Parent and the depositary for the Offer shall be entitled to deduct and withhold from any amounts payable pursuant to the Offer such amounts as are required to be deducted or withheld therefrom under U.S. federal or state, local or non-U.S. law. To the extent that such amounts are so deducted or withheld, such amounts shall be treated for all purposes under this Agreement as having been paid to the Person to whom such amounts would otherwise have been paid.

1.2 Actions of Parent and Acquisition Sub.

(a) On the Offer Commencement Date, Parent and Acquisition Sub shall: (i) cause to be filed with the SEC a Tender Offer Statement on Schedule TO (together with all amendments and supplements thereto, including all exhibits thereto, the “Schedule TO”) with respect to the Offer, which will contain as an exhibit or incorporate by reference Acquisition Sub’s offer to purchase, or portions thereof (the “Offer to Purchase”) and related letter of transmittal (the forms of which shall be reasonably acceptable to the Company) and the related

 

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form of summary advertisement, if any, in respect of the Offer (such Schedule TO and all exhibits, amendments and supplements thereto being referred to collectively in this Agreement as the “ Offer Documents ”); and (ii) cause the Offer Documents to be disseminated to holders of Company Shares to the extent required by applicable Legal Requirements. The Company shall promptly furnish to Parent and Acquisition Sub in writing all information concerning the Company that may be reasonably requested by Parent and Acquisition Sub for inclusion in the Offer Documents. Parent and Acquisition Sub shall cause the Offer Documents to comply in all material respects with the applicable requirements of the Exchange Act and the rules and regulations thereunder and all other Legal Requirements. The Company and its counsel shall be given a reasonable opportunity to review and comment on the Offer Documents prior to the filing thereof with the SEC or the dissemination thereof to the Company’s stockholders. Parent and Acquisition Sub shall promptly provide the Company and its counsel with a copy or a description of any comments received by Parent or Acquisition Sub (or by counsel to Parent or Acquisition Sub) from the SEC or its staff with respect to the Offer Documents. Each of Parent and Acquisition Sub shall respond promptly to any comments of the SEC or its staff with respect to the Offer Documents or the Offer and shall, to the extent practicable, give the Company and its counsel a reasonable opportunity to review and comment on any response to such comments proposed to be provided to the SEC or its staff.

(b) To the extent required by the applicable requirements of the Exchange Act and the rules and regulations thereunder, (i) each of Parent, Acquisition Sub and the Company shall promptly correct any information provided by it for use in the Offer Documents if such information shall have become false or misleading in any material respect and (ii) each of Parent and Acquisition Sub shall take all steps necessary to promptly cause the Offer Documents, as supplemented or amended to correct such information, to be filed with the SEC and to be disseminated to holders of Company Shares to the extent required by applicable Legal Requirements. The Company shall promptly furnish to Parent all information concerning the Company that may be reasonably requested by Parent in connection with any action contemplated by this Section 1.2(b) .

(c) Without limiting the generality of Section 8.10 , Parent shall cause to be provided to Acquisition Sub all of the funds necessary to purchase any Company Shares that Acquisition Sub becomes obligated to purchase pursuant to the Offer, and shall cause Acquisition Sub to perform, on a timely basis, all of Acquisition Sub’s obligations under this Agreement.

1.3 Actions of the Company.

(a) Company Determinations, Approvals and Recommendations . The Company hereby approves and consents to the Offer and represents and warrants to Parent and Acquisition Sub that, at a meeting duly called and held on or prior to the date hereof, the Board of Directors of the Company has, upon the terms and subject to the conditions set forth herein:

(i) unanimously determined that this Agreement is advisable;

 

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(ii) unanimously determined that this Agreement and the transactions contemplated hereby, including the Offer and the Merger are at a price and on terms that are in the best interests of the Company and the holders of Company Shares;

(iii) unanimously approved this Agreement and the transactions contemplated hereby, including the Offer and the Merger, and the Transaction Support Agreements, and the transactions contemplated thereby; and

(iv) unanimously resolved to recommend that the holders of Company Shares accept the Offer, tender their Company Shares to Acquisition Sub pursuant to the Offer and, if adoption of this Agreement by the holders of Company Shares is required by applicable Legal Requirements, adopt this Agreement in accordance with the applicable provisions of the DGCL (the “ Company Board Recommendation ”);

provided, however , that the Company Board Recommendation may be withheld, withdrawn, amended or modified in accordance with the terms of Section 5.3 .

(b) Concurrently with the filing of the Schedule TO, the Company shall file with the SEC and (following or contemporaneously with the initial dissemination of the Offer Documents to holders of Company Shares to the extent required by applicable federal securities laws and subject to the final sentence of Section 1.3(c) ) disseminate to holders of Company Shares a Solicitation/Recommendation Statement on Schedule 14D-9 (together with any amendments or supplements thereto and including all exhibits thereto, the “Schedule 14D-9”) that, subject to Section 5.3 , shall contain the determinations and approvals of the Company’s Board of Directors and the Company Board Recommendation. Each of Parent and Acquisition Sub shall promptly furnish to the Company in writing all information concerning Parent and Acquisition Sub that may be reasonably requested by the Company for inclusion in the Schedule 14D-9. The Company shall cause the Schedule 14D-9 to comply in all material respects with the Exchange Act and all other Legal Requirements. Parent and its counsel shall be given a reasonable opportunity to review and comment on the Schedule 14D-9 (including any amendment or supplement thereto) prior to the filing thereof with the SEC or the dissemination thereof to the Company’s stockholders. The Company shall promptly provide Parent and its counsel with a copy or a description of any comments received by the Company (or its counsel) from the SEC or its staff with respect to the Schedule 14D-9. The Company shall respond promptly to any comments of the SEC or its staff with respect to the Schedule 14D-9 and give Parent and its counsel a reasonable opportunity to review and comment on any response to such comments provided to the SEC or its staff.

(c) To the extent required by the applicable requirements of the Exchange Act and the rules and regulations thereunder, (i) each of Parent, Acquisition Sub and the Company shall promptly correct any information provided by it for use in the Schedule 14D-9 if such information shall have become false or misleading in any material respect, and (ii) the Company shall take all steps necessary to promptly cause the Schedule 14D-9, as supplemented or amended to correct such information, to be filed with the SEC and to be disseminated to holders of Company Shares (subject to the final sentence of this Section 1.3(c )). Parent and Acquisition Sub shall promptly furnish to the Company all information concerning Parent or Acquisition Sub that may be reasonably requested by the Company in connection with any action

 

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contemplated by this Section 1.3(c) . To the extent requested by the Company, Parent shall cause the Schedule 14D-9 and any supplement or amendment thereto to be mailed or otherwise disseminated to the Company’s stockholders together with the Offer Documents disseminated to the Company’s stockholders.

(d) Subject to the provisions of Section 5.3 , the Offer Documents may include a description of the determinations and approvals of the Board of Directors of the Company set forth in Section 1.3(a) and the Company Board Recommendation. Subject to the provisions of Section 5.3 , the Schedule 14D-9 shall include a description of the determinations and approvals of the Board of Directors of the Company set forth in Section 1.3(a) and the Company Board Recommendation.

(e) In connection with the Offer, the Company shall instruct its transfer agent to furnish to Parent or Acquisition Sub, promptly following a request by Parent or Acquisition Sub, a list, as of the most recent practicable date, but in no event as of a date more than 10 Business Days prior to the date of the request, of the record holders of Company Shares and their addresses, as well as mailing labels containing such names and addresses and any available listing or computer files containing the names and addresses of all record and beneficial holders of Company Shares, and lists of security positions of Company Shares held in stock depositories (including updated lists of stockholders, mailing labels, listings or files of securities positions), and such assistance as Parent or Acquisition Sub may reasonably request for purposes of communicating the Offer to the record and beneficial holders of Company Shares. Subject to any and all Legal Requirements, and except for such steps as are necessary to disseminate the Offer Documents and any other documents necessary to consummate the Merger, all information furnished in accordance with this Section 1.3(e) shall be (i) held in confidence by Parent and Acquisition Sub in accordance with the requirements of the letter agreement, dated February 4, 2008, between Parent and the Company (the “ Confidentiality Agreement ”) and (ii) used by Parent and Acquisition Sub only in connection with the communication of the Offer and the dissemination of any proxy or information statement relating to the Merger to the holders of Company Shares.

1.4 Board of Directors and Committees; Section 14(f) of the Exchange Act.

(a) If requested by Parent, immediately following the first time at which Acquisition Sub accepts for payment any Company Shares tendered pursuant to the Offer (the “ Acceptance Time ”) and from time to time thereafter, the Company will take all actions necessary to cause persons designated by Parent to become directors of the Company so that the total number of such persons equals that number of directors, rounded up to the next whole number, determined by multiplying (i) the total number of directors on the Company’s Board of Directors (after giving effect to any increase in the number of directors pursuant to this Section 1.4(a) ) by (ii) the percentage that the total number of Company Shares held by Parent and Acquisition Sub (after giving effect to the Company Shares purchased pursuant to the Offer), bears to the total number of the Company Shares then outstanding. The Company will, at the election of Parent, either seek and accept or otherwise secure the resignation of incumbent directors or increase the size of the Company’s Board of Directors (or both) to the extent necessary to permit Parent’s designees to be elected to the Company’s Board of Directors in accordance with this Section 1.4(a) ; provided, however , that prior to the Effective Time, the

 

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Company’s Board of Directors shall have at least two (2) Continuing Directors; and provided further, however , that notwithstanding the foregoing or anything to the contrary set forth herein, the Company may, but shall not be required to, take any reasonable action to replace any of the Continuing Directors (or otherwise appoint any person to serve as a “Continuing Director”) if no Continuing Directors remain on the Board of Directors of the Company. In the event that only one Continuing Director shall remain on the Board of Directors of the Company (whether as a result of the resignation of other Continuing Directors or for any other reason), the sole remaining Continuing Director shall be entitled to elect or designate another person to serve as a “Continuing Director,” and the Company shall take all action to cause any person so elected or designated to be appointed to the Board of Directors of the Company (any person so appointed to the Board of Directors of the Company being deemed to be a “Continuing Director” for all purposes hereunder).

(b) From time to time after the Acceptance Time, the Company shall take all action necessary to cause the individuals so designated by Parent to constitute substantially the same percentage (rounding up where appropriate) as is on the Board of Directors of the Company on (i) each committee of the Board of Directors of the Company, (ii) each board of directors of each Subsidiary of the Company and (iii) each committee of each such board of directors of each Subsidiary of the Company, in each case to the fullest extent permitted by all applicable Legal Requirements, and specifically including the Marketplace Rules of the Nasdaq Stock Market (the “ Nasdaq Marketplace Rules ”). Promptly after the Acceptance Time, the Company shall take all action necessary to elect to be treated as a “controlled company” as defined by Rule 4350(c) of the Nasdaq Marketplace Rules and make all necessary filings and disclosures associated with such status.

(c) The Company’s obligation to cause Parent’s designees to be elected or appointed to the Company’s Board of Directors shall be subject to Section 14(f) of the Exchange Act and Rule 14f-1 thereunder. The Company shall promptly take all actions required pursuant to this Section 1.4 and Section 14(f) and Rule 14f-1 in order to fulfill its obligations under this Section 1.4 , and shall include in the Schedule 14D-9 such information with respect to the Company and its officers and directors, as Section 14(f) of the Exchange Act and Rule 14f-1 thereunder require in order to fulfill its obligations under this Section 1.4 , so long as Parent shall have provided to the Company all information with respect to Parent and its designees, officers, directors and Affiliates required by Section 14(f) of the Exchange Act and Rule 14f-1 thereunder. Parent shall promptly supply to the Company in writing, and shall be solely responsible for, all such information.

1.5 Actions by Directors. Following the election or appointment of Parent’s designees to the Company’s Board of Directors pursuant to Section 1.4(a) , and until the Effective Time, the approval of a majority of the Continuing Directors (or the sole Continuing Director if there shall be only one (1) Continuing Director) shall be required to authorize (i) any amendment to or termination of this Agreement by the Company, (ii) any amendment to the Company’s Organizational Documents, (iii) any extension of time for the performance of any of the obligations or other acts of Parent or Acquisition Sub under this Agreement, (iv) any waiver of compliance with any covenant of Parent or Acquisition Sub or any condition to any obligation of the Company or any waiver of any right of the Company under this Agreement, or (v) any other consent or action by the Company’s Board of Directors with respect to this Agreement or the

 

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Merger. The authorization of any such matter by a majority of the Continuing Directors shall constitute the authorization of such matter by the Board of Directors of the Company, and no other action on the part of the Company or any other director of the Company shall be required to authorize such matter.

1.6 Top-Up Option.

(a) Subject to Sections 1.6(b) and 1.6(c) , the Company grants to Parent and Acquisition Sub an assignable and irrevocable option (the “ Top-Up Option ”) to purchase from the Company at a per share price equal to the Per Share Amount, the number of newly-issued Company Shares (the “ Top-Up Option Shares ”) equal to the number of Company Shares that, when added to the number of Company Shares owned by Parent or Acquisition Sub at the time of exercise of the Top-Up Option, constitutes 91% of the number of Company Shares that would be outstanding immediately after the issuance of all Company Shares Stock subject to the Top-Up Option); provided, however , that (x) the Top-Up Option shall not be exercisable unless, immediately after such exercise and the issuance of Company Shares pursuant thereto, the Short Form Threshold (as defined in Section 5.4(b) ) would be reached (assuming the issuance of the Top-Up Option Shares); and (y) that in no event shall the Top-Up Option be exercisable for a number of Company Shares in excess of the Company’s total authorized and unissued Company Shares.

(b) Provided that no Legal Requirement shall prohibit the granting or exercise of the Top-Up Option or the issuance of Company Shares pursuant to such exercise, the Top-Up Option may be exercised by Parent or Acquisition Sub, at any time at or after the Acceptance Time. The aggregate purchase price payable for the Company Shares being purchased by Parent or Acquisition Sub pursuant to the Top-Up Option shall be determined by multiplying the number of such shares by the Per Share Amount. Such purchase price may be paid by Parent or Acquisition Sub, at its election, either entirely in cash or by paying in cash an amount equal to not less than the aggregate par value of such shares and by executing and delivering to the Company a promissory note having a principal amount equal to the balance of such purchase price. Any such promissory note shall bear simple interest at the rate of 3% per annum.

(c) In the event Parent or Acquisition Sub wishes to exercise the Top-Up Option, Parent or Acquisition Sub shall deliver to the Company a notice setting forth (i) the number of Company Shares that Parent or Acquisition Sub intends to purchase pursuant to the Top-Up Option, (ii) the manner in which Parent or Acquisition Sub intends to pay the applicable exercise price and (iii) the place and time at which the closing of the purchase of such Company Shares by Parent or Acquisition Sub is to take place. At the closing of the purchase of such Company Shares, Parent or Acquisition Sub shall cause to be delivered to the Company the consideration required to be delivered in exchange for such shares, and the Company shall cause to be issued to Parent or Acquisition Sub (as the case may be) a certificate representing such shares. The obligation of the Company to issue such shares will be subject to compliance with all applicable regulatory requirements.

 

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SECTION 2. THE MERGER; EFFECTIVE TIME

2.1 Merger of Acquisition Sub into the Company. Upon the terms and subject to the conditions set forth in this Agreement and in accordance with the Delaware General Corporation Law (the “ DGCL ”), at the Effective Time (as defined in Section 2.3 ), Acquisition Sub shall be merged with and into the Company, the separate existence of Acquisition Sub shall cease and the Company will continue as the surviving corporation in the Merger. The Company, as the surviving corporation of the Merger is sometimes referred to as the “ Surviving Corporation .”

2.2 Effect of the Merger. The Merger shall have the effects set forth in this Agreement and in the applicable provisions of the DGCL.

2.3 Effective Time. Upon the terms and subject to the conditions set forth in this Agreement, as soon as practicable following the Acceptance Time and the satisfaction or waiver of the conditions set forth in Section 6 , the parties hereto shall cause a properly executed certificate of merger (or, if applicable, a certificate of ownership and merger) conforming to the requirements of the DGCL (the “ Certificate of Merger ”) to be filed with the Secretary of State of the State of Delaware in accordance with the applicable provisions of the DGCL. The Merger shall become effective at the time the Certificate of Merger is filed with the Secretary of State of the State of Delaware, or at such later time as is agreed to by the parties hereto and specified in the Certificate of Merger (the time at which the Merger becomes effective being referred to in this Agreement as the “ Effective Time ”). At 10:00 a.m. (Pacific time) on the date on which the Certificate of Merger is to be so filed, a closing shall be held at the offices of Wilson Sonsini Goodrich & Rosati, Professional Corporation, One Market Street, Spear Tower, Suite 3300, San Francisco, California 94105-1126 (or such other place or time as Parent and the Company may jointly designate) for the purpose of confirming the satisfaction or waiver of each of the conditions set forth in Section 6 .

2.4 Certificate of Incorporation and Bylaws; Directors and Officers. Unless otherwise jointly determined by Parent and the Company prior to the Effective Time, at the Effective Time:

(a) the Certificate of Incorporation of the Company shall, subject to the provisions of Section 5.15 , be amended and restated in its entirety to be identical to the certificate of incorporation of Acquisition Sub as in effect immediately prior to the Effective Time until thereafter amended in accordance with the DGCL and as provided in such certificate of incorporation, provided, that, Article I of the certificate of incorporation of Acquisition Sub shall be amended and restated in its entirety to read as follows: “The name of the corporation is Simtek Corporation”;

(b) subject to Section 5.15 , the Bylaws of the Surviving Corporation shall be amended and restated as of the Effective Time to conform to the Bylaws of Acquisition Sub as in effect immediately prior to the Effective Time;

(c) the directors of the Surviving Corporation immediately after the Effective Time shall be the respective individuals who are directors of Acquisition Sub

 

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immediately prior to the Effective Time, each to hold office in accordance with the Certificate of Incorporation and Bylaws of the Surviving Corporation until their respective successors are duly elected or appointed and qualified; and

(d) the initial officers of the Surviving Corporation immediately after the Effective Time shall be the officers of Acquisition Sub immediately prior to the Effective Time, each to hold office in accordance with the Certificate of Incorporation and Bylaws of the Surviving Corporation until their respective successors are duly appointed.

2.5 Effect on Capital Stock. Subject to Section 2.8 , at the Effective Time, by virtue of the Merger and without any further action on the part of Parent, Acquisition Sub, the Company or any stockholder of the Company:

(a) any Company Shares then held by the Company or any wholly owned Subsidiary of the Company (or held in the Company’s treasury) shall cease to exist, and no consideration shall be paid in exchange therefor;

(b) any Company Shares then held by Parent, Acquisition Sub or any other wholly owned Subsidiary of Parent shall cease to exist, and no consideration shall be paid in exchange therefor;

(c) except as provided in clauses “(a)” and “(b)” above, each Company Share then outstanding (excluding any Appraisal Shares (as defined in Section 2.8(c) ), shall be converted into the right to receive, in cash, without interest, the Per Share Amount or such greater cash amount as may have been paid to any holder of Company Shares pursuant to the Offer;

(d) each share of common stock, par value $0.01 per share, of Acquisition Sub then outstanding shall be converted into one share of the common stock of the Surviving Corporation; and

(e) each Company Option then outstanding under any of the Company Option Plans shall be treated in accordance with the provisions of Section 5.10(a) .

Without duplication of the effects of Section 1.1(f) , if, between the date of this Agreement and the Effective Time, the outstanding Company Shares are changed into a different number or class of shares by reason of any stock split, division or subdivision of shares, stock dividend, reverse stock split, consolidation of shares, reclassification, recapitalization or other similar transaction, then the Per Share Amount payable pursuant to Section 2.5(c) shall be adjusted to the extent appropriate.

2.6 Closing of the Company’s Transfer Books. From and after the Effective Time: (a) all Company Shares outstanding immediately prior to the Effective Time shall no longer be outstanding and shall automatically be cancelled, retired and cease to exist and all holders of certificates previously representing Company Shares that were outstanding immediately prior to the Effective Time (other than Appraisal Shares) shall cease to have any rights as stockholders of the Company, except for the right to receive the amount payable therefor pursuant to Section 2.5(c) upon the surrender of Company Stock Certificate (as defined below); and (b) the stock

 

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transfer books of the Company shall be closed with respect to all Company Shares outstanding immediately prior to the Effective Time. No further transfer of any such Company Shares shall be made on such stock transfer books from and after the Effective Time, other than transfers to reflect, in accordance with customary settlement procedures, trades effected prior to the Effective Time. If, after the Effective Time, a valid certificate previously representing any of such Company Shares (a “ Company Stock Certificate ”) is presented to the Paying Agent (as defined in Section 2.7(a) ) or to the Surviving Corporation or Parent, such Company Stock Certificate shall be canceled and shall be exchanged as provided in Section 2.7 .

2.7 Exchange of Certificates.

(a) Prior to the Effective Time, Parent shall select a reputable bank or trust company to act as paying agent with respect to the Merger (the “ Paying Agent ”).

(b) Immediately following the Effective Time, Parent shall deposit (or cause to be deposited) with the Paying Agent, for payment to the holders of Company Shares pursuant to the provisions of this Section 2 , an amount of cash equal to the product obtained by multiplying (x) the amount payable therefor pursuant to Section 2.5(c) and (y) the aggregate number of shares of Company Shares issued and outstanding immediately prior to the Effective Time (excluding Company Shares then owned by Parent, Acquisition Sub, the Company, or any direct or indirect, wholly-owned Subsidiary of Parent, Acquisition Sub or the Company immediately prior to the Effective Time (whether pursuant to the Offer or otherwise)).

(c) Promptly after the Effective Time, Parent shall cause the Paying Agent to mail to each Person who was, immediately prior to the Effective Time, a holder of record of a Company Stock Certificate and each holder of record of Company Shares held in book-entry form, in each case which immediately prior to the Effective Time represented outstanding Company Shares (other than Appraisal Shares), a form of letter of transmittal in customary form (which shall specify that delivery shall be effected, and risk of loss and title to the Company Stock Certificates shall pass, only upon delivery of the Company Stock Certificates to the Paying Agent) and instructions for use in effecting the surrender of Company Stock Certificates previously representing such Company Shares in exchange for payment therefor. Upon surrender of Company Stock Certificates for cancellation to the Paying Agent or to such other agent or agents as may be appointed by Parent or delivery of an agents’ message in respect of Company Shares held in book-entry form, together with such letter of transmittal, duly completed and validly executed in accordance with the instructions thereto, the holders of such Company Stock Certificates or the holders of shares held in book-entry form shall be entitled to receive in exchange therefor the amount payable in respect thereof pursuant to the provisions of this Section 2 , and the Company Stock Certificates so surrendered shall forthwith be canceled. The Paying Agent shall accept such Company Stock Certificates upon compliance with such reasonable terms and conditions as the Paying Agent may impose to effect an orderly exchange thereof in accordance with normal exchange practices. No interest shall be paid or accrued for the benefit of holders of the Company Stock Certificates on the cash amounts payable upon the surrender of such Company Stock Certificates pursuant to this Section 2.7 . Until so surrendered, outstanding Company Stock Certificates shall be deemed from and after the Effective Time, to evidence only the right to receive the amount payable in respect thereof pursuant to the provisions of this Section 2 .

 

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(d) On or after the first anniversary of the Effective Time, the Paying Agent shall deliver to the Surviving Corporation any funds made available by Parent to the Paying Agent which have not been disbursed to holders of Company Stock Certificates, and thereafter such holders shall be entitled to look to Parent and the Surviving Corporation, as general creditors thereof, with respect to the cash amounts that may be payable upon surrender of their Company Stock Certificates. Neither the Paying Agent nor the Surviving Corporation shall be liable to any holder of a Company Stock Certificate for any amount properly paid to a public official pursuant to any applicable abandoned property or escheat law.

(e) If any Company Stock Certificate shall have been lost, stolen or destroyed, then, upon the making of an affidavit of that fact by the Person claiming such Company Stock Certificate to be lost, stolen or destroyed, Parent shall cause the Paying Agent to pay in exchange for such lost, stolen or destroyed Company Stock Certificate the cash amount payable in respect thereof pursuant to this Agreement; provided, however , that Parent or the Paying Agent may, in its discretion and as a condition precedent to the payment of the cash amount payable in respect of any lost, stolen or destroyed Company Stock Certificate, require the owners of such lost, stolen or destroyed Company Stock Certificates to deliver a bond in such sum as it may reasonably direct as indemnity against any claim that may be made against Parent, the Surviving Corporation or the Paying Agent with respect to the Company Stock Certificates alleged to have been lost, stolen or destroyed.

(f) In the event of a transfer of ownership of Company Shares which is not registered in the transfer records of the Company, or if payment is to be made with respect to Company Shares in a name other than that in which the Company Stock Certificates surrendered in exchange therefor are registered in the stock transfer books or ledger of the Company, payment may be made to a Person other than the Person in whose name the Certificate so surrendered is registered in the stock transfer books or ledger of the Company only if the Company Stock Certificate previously representing such Company Shares is presented to the Paying Agent properly endorsed and accompanied by all documents reasonably required by the Paying Agent to evidence and effect such transfer and the Person requesting such payment has paid to Parent (or any agent designated by Parent) any transfer or other Taxes required by reason of the payment of the amount payable in respect thereof to a Person other than the registered holder of such Company Stock Certificate, or presented evidence that any applicable stock transfer taxes relating to such transfer have been paid or are otherwise not payable.

(g) Parent, the Company, the Surviving Corporation and the Paying Agent shall be entitled to deduct and withhold from any payment pursuant to this Section 2 such amounts as are required by applicable law to be deducted or withheld therefrom under U.S. federal or state, local or non-U.S. law, and to request any necessary Tax forms, including Form W-9 or the appropriate series of Form W-8, as applicable, or any similar information, from any recipient of any payment hereunder. To the extent that any amounts are so deducted or withheld, such amounts shall be treated for all purposes of this Agreement as having been paid to the Person to whom such amounts would otherwise have been paid.

 

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2.8 Appraisal Rights.

(a) Notwithstanding anything to the contrary contained in this Agreement, any Company Shares that constitute Appraisal Shares (as defined in Section 2.8(c) ) shall not be converted into or represent the right to receive payment in accordance with Section 2.7 , and each holder of Appraisal Shares shall be entitled only to such rights with respect to such Appraisal Shares as may be granted to such holder pursuant to Section 262 of the DGCL. From and after the Effective Time, a holder of Appraisal Shares shall not have and shall not be entitled to exercise any of the voting rights or other rights of a stockholder of the Surviving Corporation. If any holder of Appraisal Shares shall fail to perfect or shall otherwise lose such holder’s right of appraisal under Section 262 of the DGCL, then (i) any right of such holder to require the Surviving Corporation to purchase such Appraisal Shares for cash shall be extinguished, and (ii) such Appraisal Shares shall automatically be converted into and shall represent only the right to receive (upon the surrender of the Company Stock Certificate(s) previously representing such Appraisal Shares) payment for such Appraisal Shares without any interest thereon in accordance with this Section 2 .

(b) The Company (i) shall promptly give Parent written notice of any demand by any stockholder of the Company for appraisal of such stockholder’s Company Shares pursuant to Section 262 of the DGCL, and (ii) shall give Parent the opportunity to participate in all negotiations and proceedings with respect to any such demand. Any communication to be made by the Company to any Company Stockholder with respect to such demands shall be submitted to Parent in advance and shall not be presented to any Company Stockholder prior to the Company’s receipt of Parent’s consent, which consent shall not be unreasonably withheld, conditioned or delayed. The Company shall not make any payment with respect to any demands for appraisal or settle or offer to settle any such demands for payment in respect of Appraisal Shares without the prior consent of Parent.

(c) For purposes of this Agreement, “ Appraisal Shares ” shall refer to any Company Shares outstanding immediately prior to the Effective Time that are held by stockholders who have neither voted in favor of adoption of this Agreement nor consented thereto in writing and who shall have properly and validly exercised their statutory appraisal rights under Section 262 of the DGCL with respect to such Company Shares.

2.9 Further Action. If, at any time after the Effective Time, any further action is necessary to carry out the purposes of this Agreement, the officers and directors of the Surviving Corporation and Parent shall (in the name of Acquisition Sub, in the name of the Company or otherwise) take such action.

SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY

The Company represents and warrants to Parent and Acquisition Sub that, except as set forth in the disclosure schedule delivered to Parent on the date of this Agreement (the “ Company Disclosure Schedule ”) (the disclosures in which Company Disclosure Schedule shall qualify only (i) the representations and warranties of the Company set forth in the corresponding Section of this Agreement, and (ii) the representations and warranties set forth in any other Section of this Agreement, but in the case of this clause (ii) if and to the extent that it is reasonably apparent from the text of such disclosure that it is applicable to the representations and warranties set forth in such other Sections of this Agreement):

 

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3.1 Due Organization and Good Standing; Subsidiaries.

(a) The Company and each of its Subsidiaries is a corporation or Gesellschaft mit beschränkter Haftung (“G.m.b.H”), duly organized and validly existing and (where such concept is recognized under the laws of the jurisdiction in which it is incorporated) in good standing under the laws of the jurisdiction in which it is organized, and has all requisite corporate power and authority necessary to carry on its business as it is now being conducted. The Company and each of its Subsidiaries is duly qualified to do business and is in good standing in each jurisdiction in which the nature of the business conducted by it makes such qualification necessary, except where the failure to be so qualified would not have a Company Material Adverse Effect.

(b) Part 3.1 of the Company Disclosure Schedule lists all Subsidiaries of the Company, together with the jurisdiction of organization of each such Subsidiary. All of the outstanding shares of capital stock or membership interests, as the case may be, of each of the Company’s Subsidiaries are owned directly or indirectly by the Company free and clear of all liens, pledges or encumbrances.

3.2 Certificate of Incorporation; Bylaws. The Company has delivered or made available to Parent copies of the Organizational Documents of the Company and each of its Subsidiaries, including all amendments thereto. Neither the Company nor any Subsidiary is in violation of its Organizational Documents.

3.3 Capitalization, Etc.

(a) The authorized capital stock of the Company consists of 30,000,000 Company Shares and 200,000 shares of preferred stock (“ Preferred Shares ”). As of July 30, 2008: (i) 16,580,886 Company Shares were issued and 16,579,886 Company shares were outstanding; (ii) no Preferred Shares were outstanding; (iii) 3,043,646 Company Shares were issuable upon exercise of Company Warrants that were issued and outstanding; (iii)(A) 1,613,535 Company Shares were issuable upon exercise of options issued pursuant to the Company’s 2007 Equity Incentive Plan and (B) 600,666 Company Shares were issuable upon exercise of options issued pursuant to the Company’s 1994 Non-Qualified Stock Option Plan, as amended; and (iv) 954,545 Company Shares were issuable upon conversion of the Company Debentures. As of July 30, 2008, 1,185,694 Company Shares were reserved for future issuance pursuant to the Company’s 2007 Equity Incentive Plan, 431,797 Company Shares were reserved for future issuance pursuant to the Company’s Employee Stock Purchase Plan and 0 Company Shares were reserved for future issuance pursuant to the Company’s 1994 Non-Qualified Stock Option Plan, as amended. The Company has delivered or made available to Parent copies of each of (A) the Company Equity Plans, which cover the stock options and restricted stock awards granted by the Company that are outstanding as of the date of this Agreement, and (B) the forms of all stock option agreements and restricted stock award agreements evidencing such options and stock awards.

 

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(b) Except for options, rights, securities and plans referred to in Section 3.3(a) , there is no: (i) outstanding option or right to acquire from the Company any shares of the capital stock of the Company; or (ii) outstanding security of the Company that is convertible into or exchangeable for any Company Shares.

(c) There are no outstanding (i) securities of any of the Company’s Subsidiaries convertible into or exchangeable for shares of capital stock of, or other equity or voting interest in, any Subsidiary of the Company, (ii) options, warrants, rights or other commitments or agreements to acquire from any of the Company’s Subsidiaries, or that obligate any of the Company’s Subsidiaries to issue, any capital stock of, or other equity or voting interest in, or any securities convertible into or exchangeable for shares of capital stock of, or other equity or voting interest in, any Subsidiary of the Company, (iii) obligations of the Company to grant, extend or enter into any subscription, warrant, right, convertible or exchangeable security or other similar agreement or commitment relating to any capital stock of, or other equity or voting interest (including any voting debt) in, any Subsidiary of the Company (the items in clauses (i), (ii) and (iii), together with the capital stock of the Subsidiaries of the Company, being referred to collectively as “ Subsidiary Securities ”) or (iv) other obligations by the Company or any of its Subsidiaries to make any payments based on the price or value of any Subsidiary Securities. There are no Contracts or arrangements of any kind which obligate any of the Company’s Subsidiaries to repurchase, redeem or otherwise acquire any outstanding Subsidiary Securities.

 

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3.4 SEC Filings; Financial Statements.

(a) All registration statements, prospectuses, reports required by Section 13 or 15(d) of the Exchange Act and filings pursuant to Regulation D promulgated under the Securities Act (including, in each case, all exhibits and schedules thereto) required to be filed or furnished by the Company with the SEC since January 1, 2006 have been so filed or furnished, and the Company will file prior to the expiration date of the Offer all forms, reports and documents with the SEC that are required to be filed or furnished by it prior to such time (all such forms, reports and documents, together with any other forms, reports or other documents filed or furnished (as applicable) by the Company with the SEC after January 1, 2006 and on or prior to the expiration date of the Offer that are not required to be so filed or furnished, the “ Company SEC Documents ”). As of the time it was filed or will be filed (as the case may be) with the SEC (or, if amended or superseded by a filing, then on the date of such filing): (i) each of the Company SEC Documents complied or will comply (as the case may be) in all material respects with the applicable requirements of the Securities Act or the Exchange Act (as the case may be), and with all applicable provisions of the Sarbanes-Oxley Act, each as in effect on the date such Company SEC Document was, or will be, filed; and (ii) none of the Company SEC Documents contained or will contain (as the case may be) any untrue statement of a material fact or omitted or will omit (as the case may be) to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. True and correct copies of all Company SEC Documents filed prior to the date hereof, whether or not required under applicable laws, have been furnished to Parent or are publicly available in the Electronic Data Gathering, Analysis and Retrieval (EDGAR) database of the SEC.

(b) Neither the Company nor any of its Subsidiaries has received from the SEC or any other Governmental Entity any written comments or questions with respect to any of the Company SEC Documents (including the financial statements included therein) or any registration statement filed by any of them with the SEC or any notice from the SEC or other Governmental Entity that such Company SEC Documents (including the financial statements included therein) or registration statements are being reviewed or investigated, and, to the Company’s knowledge, there is not any investigation or review being conducted by the SEC or any other Governmental Entity of any Company SEC Documents (including the financial statements included therein). Except for filings pursuant to Regulation D promulgated under the Securities Act, none of the Company’s Subsidiaries is required to file any forms, reports or other documents with the SEC. No executive officer of the Company has failed to make the certifications required of him or her under Section 302 or 906 of the Sarbanes-Oxley Act with respect to any Company SEC Documents, except as disclosed in certifications filed with the Company SEC Documents. Neither the Company nor any of its executive officers has received notice from any Governmental Entity challenging or questioning the accuracy, completeness, form or manner of filing of such certifications.

(c) The consolidated financial statements of the Company and its Subsidiaries (including any related notes) contained in the Company SEC Documents fairly present, in all material respects, or will present in all material respects, as the case may be, the consolidated financial position of the Company and its Subsidiaries as of the respective dates thereof and the consolidated results of operations and cash flows of the Company and its

 

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Subsidiaries for the periods covered thereby. The consolidated financial statements of the Company and its Subsidiaries (including any related notes) contained in the Company SEC Documents have been or will be (as the case may be) prepared in accordance with GAAP applied on a consistent basis throughout the periods and at the dates covered (except as may be indicated in the notes to such financial statements or, in the case of unaudited statements, as permitted by Form 10-Q of the SEC, and except that unaudited financial statements may not contain footnotes and are subject to year-end adjustments).

(d) The Company and each of its Subsidiaries has established and maintains, adheres to and enforces a system of internal accounting controls which are effective in providing assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with GAAP, including policies and procedures that (i) require the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company and its Subsidiaries, (ii) provide assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of the Company and its Subsidiaries are being made only in accordance with appropriate authorizations of management and the Board of Directors of the Company and (iii) provide assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the assets of the Company and its Subsidiaries. Since January 1, 2005, neither the Company nor any of its Subsidiaries (including any employee thereof) nor, to the Company’s knowledge, the Company’s independent auditors has identified or been made aware of (A) any significant deficiency or material weakness in the system of internal accounting controls utilized by the Company and its Subsidiaries, (B) any fraud, whether or not material, that involves the Company’s management (including management of the Company’s Subsidiaries) or other employees who have a role in the preparation of financial statements or the internal accounting controls utilized by the Company and its Subsidiaries or (C) any claim or allegation regarding any of the foregoing.

(e) Neither the Company nor any of its Subsidiaries is a party to, or has any commitment to become a party to, any joint venture, partnership agreement or any similar Contract (including any Contract relating to any transaction, arrangement or relationship between or among the Company or any of its Subsidiaries, on the one hand, and any unconsolidated affiliate, including any structured finance, special purpose or limited purpose entity or Person, on the other hand (such as any arrangement described in Section 303(a)(4) of Regulation S-K of the SEC)) where the purpose or effect of such arrangement is to avoid disclosure of any material transaction involving the Company or any its Subsidiaries in the Company’s consolidated financial statements.

(f) Since January 1, 2005, neither the Company nor any of its Subsidiaries nor, to the Company’s knowledge, any director, officer, employee, auditor, accountant, consultant or representative of the Company or any of its Subsidiaries has received or otherwise had or obtained knowledge of any substantive complaint, allegation, assertion or claim, whether written or oral, that the Company or any of its Subsidiaries has engaged in questionable accounting or auditing practices. To the Company’s knowledge, no current or former attorney representing the Company or any of its Subsidiaries has reported evidence of a material violation of securities laws, breach of fiduciary duty or similar violation by the Company or any of its officers, directors, employees or agents to the Board of Directors of the Company or any committee thereof or to any director or executive officer of the Company.

 

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(g) To the Company’s knowledge, no employee of the Company or any of its Subsidiaries has provided or is providing information to any law enforcement agency regarding the commission or possible commission of any crime or the violation or possible violation of any applicable Legal Requirements of the type described in Section 806 of the Sarbanes-Oxley Act by the Company or any of its Subsidiaries. Neither the Company nor any of its Subsidiaries nor, to the knowledge of the Company, any director, officer, employee, contractor, subcontractor or agent of the Company or any such Subsidiary has discharged, demoted, suspended, threatened, harassed or in any other manner discriminated against an employee of the Company or any of its Subsidiaries in the terms and conditions of employment because of any lawful act of such employee described in Section 806 of the Sarbanes-Oxley Act.

(h) The Company is in compliance in all material respects with all effective provisions of the Sarbanes-Oxley Act applicable to the Company.

(i) Neither the Company nor any of its Subsidiaries has any liabilities except for: (i) liabilities disclosed in the financial statements (including any related notes) for the quarter ended June 30, 2008 and attached hereto as Schedule 3.4(i) ; (ii) liabilities incurred in connection with this Agreement; and (iii) liabilities that would not have, individually or in the aggregate, a Company Material Adverse Effect.

3.5 Absence of Certain Changes. Between January 1, 2008 and the date of this Agreement, neither the Company nor any of its Subsidiaries has: (a) suffered any adverse change with respect to its business or financial condition which has had a Company Material Adverse Effect; (b) suffered any material loss, damage or destruction to any of its assets; (c) amended its Organizational Documents; (d) incurred any indebtedness for borrowed money or guaranteed any such indebtedness, except in the ordinary course of business; (e) changed, in any material respect, its accounting methods, principles or practices or Tax election, except as required by changes in GAAP; (f) sold or otherwise transferred any material portion of its assets, except for sales of equipment and inventory in the ordinary course of business; (g) declared, set aside or paid any dividend with respect to the outstanding Company Shares; (h) acquired any equity interest or voting interest in any Entity; (i) received any resignation of any officer or key employee of the Company or (j) entered into any agreement to take any of the actions referred to in clauses “(c)” through “(i)” of this sentence.

3.6 IP Rights.

(a) Part 3.6(a) of the Company Disclosure Schedule accurately identifies:

(i) In Part 3.6(a)(i) of the Company Disclosure Schedule: (A) each item of Registered IP in which the Company or any of its Subsidiaries has an ownership interest of any nature (whether exclusively, jointly with another Person or otherwise but excluding any interest arising out of any exclusive or nonexclusive license) (“ Company Registered IP ”); (B) the jurisdiction in which such item of Company Registered IP has been registered or filed and the applicable registration or serial number; and (C) any other Person that has an ownership interest in such item of Company Registered IP and the nature of such ownership interest;

 

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(ii) in Part 3.6(a)(ii) of the Company Disclosure Schedule each Contract to which the Company is currently bound pursuant to which any Intellectual Property or Intellectual Property Rights are licensed to the Company or any of its Subsidiaries (other than the licenses to Open Source Material listed in Part 3.6(h)(i) of the Company Disclosure Schedule and other than non-exclusive licenses for any third-party software or other third-party Intellectual Property or Intellectual Property Rights, including, without limitation, shrink-wrap, off-the-shelf or commercially available software, that: (1) in the case of third party software, is so licensed in executable or object code form pursuant to a nonexclusive software license, (2) is not, and is not intended by Company to be, incorporated into or used in the design, development, manufacture or provision of any Company Product; or (3) is generally available on standard terms for less than $25,000 per year or $50,000 in perpetuity for all licenses for such item of third-party software or other third-party Intellectual Property or Intellectual Property Rights held by Company and its Subsidiaries);

(iii) in Part 3.6(a)(iii) of the Company Disclosure Schedule, each Contract under which an express license or express covenant not to sue is held by any third party in or to any of the Company IP, or pursuant to which Company or any of its Subsidiaries has granted an express license or express covenant not to sue under any Intellectual Property Rights to any third party;

(iv) in Part 3.6(a)(iv) of the Company Disclosure Schedule, each Company Product currently made commercially available or under development by the Company (except for Company Products being jointly developed by Parent and the Company) and each Company Product made commercially available by the Company during the three (3) year period preceding the date of this Agreement;

(v) to the Company’s knowledge, in Part 3.6(a)(v) of the Company Disclosure Schedule, for each Company Product required to be disclosed under Part 3.6(a)(iv) of the Company Disclosure Schedule, all Intellectual Property or Intellectual Property Rights licensed to the Company or any of it Subsidiaries, except for standard building blocks ( i.e. , transistors and capacitors) from standard foundry libraries (“Third Party IP”), that are used or embodied in or would otherwise be infringed by such Company Product, and for each such item of Third Party IP, the agreement pursuant to which the Company or its Subsidiary has a license to such Third Party IP.

Complete and accurate copies of each Contract identified in Part 3.6(a)(ii), Part 3.6(a)(iii) or Part 3.6(a)(v) of the Company Disclosure Schedule have been provided or made available to Parent. The consummation of the transactions contemplated by this Agreement will neither violate nor result in the breach, modification, cancellation, termination or suspension of such Contracts. Each of Company and its Subsidiaries is in material compliance with, and has not materially breached any term of any such Contracts and, to the knowledge of Company, all other parties to such Contracts are in compliance with, and have not materially breached any term of, such Contracts, other than such breaches for which no legal or equitable remedy is available to the counterparty under such Contract. Following the Effective Time, the Surviving Corporation will

 

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be permitted to exercise all of Company’s and its Subsidiaries’ rights under such Contracts to the same extent Company and its Subsidiaries would have been able to had the transactions contemplated by this Agreement not occurred and without the payment of any additional amounts or consideration other than ongoing fees, royalties or payments which Company or its Subsidiaries would otherwise be required to pay. No Company Product or other material Company IP is subject to any covenant or other restriction (including exclusivity, non-competition and most-favored pricing restrictions) that materially limits or restricts the ability of the Company or any of its Subsidiaries to use, exploit, assert, or enforce such Company Product or material Company IP anywhere in the world.

(b) Without expanding the scope of Section 3.6(f) , the Company and its Subsidiaries exclusively own all right, title and interest to and in, and, have the sole and exclusive right to bring a claim or suit against a third party for infringement or misappropriation of, the Company IP (other than Company Registered IP identified in Part 3.6(a)(i) of the Company Disclosure Schedule as being subject to the ownership interest of another Person) free and clear of any liens or encumbrances (other than pursuant to the Contracts listed in Part 3.6(a)(iii) of the Company Disclosure Schedule). Without limiting the generality of the foregoing, other than as identified in Part 3.6(b) of the Company Disclosure Schedule:

(i) all documents and instruments necessary to perfect the rights of the Company and its Subsidiaries in the Company Registered IP have been validly executed, delivered and filed (on or before any applicable deadline) with the appropriate Governmental Entity;

(ii) each Person who is or was an employee, consultant or independent contractor of the Company or any of its Subsidiaries and who is or was involved in the creation or development of any Company IP (or any Intellectual Property or Intellectual Property Rights developed for the Company that the Company intended to be Company IP), or who is or was named as an inventor on any patent application filed or owned by the Company or any of its Subsidiaries, has signed one or more agreements containing an assignment of that Person’s rights in such Company IP (or other Intellectual Property or Intellectual Property Rights) to the Company or one of its Subsidiaries;

(iii) to the knowledge of the Company, no past or current employee of the Company or any of its Subsidiaries has any claim, right (whether or not currently exercisable) or interest to or in any material Company IP;

(iv) to the knowledge of the Company, no past or current employee, consultant or independent contractor of the Company or any of its Subsidiaries is in material breach of any Contract with any former employer or other Person concerning Intellectual Property Rights or confidentiality where the cause or nature of the breach arises directly out of any services, including the development of any Company IP, performed by such employee, consultant or independent contractor for the Company or any of its Subsidiaries;

(v) no funding, facilities or personnel of any Governmental Entity or any university or other educational institution were used to develop or create, in whole or in part, any Company IP; and

 

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(vi) neither the Company nor any of its Subsidiaries has assigned or otherwise transferred ownership of, or agreed to assign or otherwise transfer ownership of, any material Company IP (or anything that was material Company IP immediately prior to such assignment or transfer) to any other Person.

(c) To the knowledge of the Company, all Company Registered IP (other than pending applications for Registered IP) is valid, and is enforceable in all material respects. Without limiting the generality of the foregoing:

(i) to the knowledge of the Company, no registered trademark owned by the Company or any of its Subsidiaries, and no other trademark currently being used by the Company or any of its Subsidiaries in the ordinary course of business (collectively, “ Company Trademarks ”), conflicts with any registered trademark of any other Person in any jurisdiction where the Company or any of its Subsidiaries currently sells, markets or promotes (directly or through any Person who is authorized by the Company or any of its Subsidiaries to so sell, market or promote) any of their products or services using such Company Trademarks;

(ii) each item of Company Registered IP is in compliance with all material Legal Requirements, and all filings, payments and other actions required to be made or taken to maintain each item of Company Registered IP in full force and effect have been made by the applicable deadline or, if not made, will not adversely affect such Company Registered IP or the rights of Company in such Company Registered IP; and

(iii) no interference, opposition, reissue, reexamination or other Legal Proceeding of any nature is pending or, to the knowledge of the Company, threatened, in which the scope, validity or enforceability of any Company Registered IP is being, has been or would reasonably be expected to be contested or challenged.

(d) Neither the execution, delivery or performance of this Agreement, nor the consummation of any of the transactions contemplated by this Agreement, including the assignment to Parent or Acquisition Sub by operation of law of any Contracts or agreements to which Company or any of its Subsidiaries is a party, will, with or without notice or the lapse of time, result in, or give any other Person the right or option to cause: (i) either Parent or Acquisition Sub granting to any third party any right to or with respect to any material Intellectual Property or Intellectual Property Rights owned by, or licensed to, either of them; (ii) any Person receiving a license or right under any Intellectual Property or Intellectual Property Rights from Company or any of its Subsidiaries that was either not granted or not exercisable prior to the Closing; (iii) either Parent or Acquisition Sub being bound by, or subject to, any non-compete or other material restriction on the operation or scope of their respective businesses, or (iv) either Parent or Acquisition Sub being obligated to pay any royalties or other material amounts to any third party in excess of those payable by Parent or the Company, respectively prior to the Closing; (v) a loss of, or Encumbrance on, any Company IP; or (vi) the release, disclosure or delivery of any Company IP by any escrow agent to any other Person.

(e) To the knowledge of the Company as of the date of this Agreement: (i) no Person has materially infringed or misappropriated any Company IP; and (ii) no Person is currently materially infringing or misappropriating any Company IP.

 

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(f) To the knowledge of the Company, the operation of the business of Company and its Subsidiaries as such business currently is conducted or contemplated to be conducted, including the design, development, manufacture, distribution, import, reproduction, marketing, licensing or sale of the Company Products, has not, does not and will not infringe (directly, contributorily, by inducement or otherwise), misappropriate or otherwise violate any Intellectual Property Right of any other Person. Without limiting the generality of the foregoing:

(i) no infringement, misappropriation or similar Legal Proceeding is pending or, to the knowledge of the Company, threatened against the Company or any of its Subsidiaries or, to the Company’s knowledge, against any other Person who, as a party to Contract to which the Company or any Subsidiary is a party, may be entitled to be indemnified, defended, held harmless or reimbursed by the Company or any of its Subsidiaries with respect to such Legal Proceeding;

(ii) in the three (3) year period prior to the date of this Agreement, neither the Company nor any of its Subsidiaries has received any written notice (nor, to the knowledge of the Company, any non-written notice) alleging infringement, misappropriation or violation by the Company or any of its Subsidiaries of any Intellectual Property Right of another Person, except in the case of any such non-written notice would not reasonably be expected to have a material and adverse effect on any Company Product or the business of the Company or any of its Subsidiaries as currently conducted or proposed to be conducted; and

(iii) Company has not received written notice (or, to the knowledge of the Company, any non-written notice) of any pending Legal Proceeding involving any Intellectual Property Right licensed to the Company or any of its Subsidiaries, except for any such Legal Proceeding that would not reasonably be expected to have a material and adverse effect on the use or exploitation of such Intellectual Property Right by the Company or any of its Subsidiaries.

(g) Neither the Company nor any of its Subsidiaries nor any other party acting on its behalf has disclosed, licensed, delivered or made available to any Person any Company Source Material, except for disclosures to Company employees, consultants or independent contractors under agreements that prohibit use or disclosure except in the performances of services to or for (directly or indirectly) the Company or any Subsidiary thereof. No Company Source Material has been delivered or made available to any third party escrow agent and neither the Company nor any of its Subsidiaries has, as of the date of this Agreement, any duty or obligation (whether present, contingent or otherwise) to deliver or make available any Company Source Material to any third party escrow agent. No event has occurred, and, to the knowledge of the Company, no circumstance or condition exists, that (with or without notice or lapse of time) will, or would reasonably be expected to, result in the release from any third party escrow agent, or the license or delivery to any other Person, of any Company Source Material. Neither the execution, delivery or performance of this Agreement, nor the consummation of the Merger or any other transactions contemplated by this Agreement, including the assignment to Parent or Acquisition Sub by operation of law of any Contracts or agreements to which Company or any of its Subsidiaries is a party, (with or without notice or lapse of time) will, or would reasonably be expected to, result in the release from any third party escrow agent, or the license or delivery to any other Person, of any Company Source Material.

 

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(h) Part 3.6(h)(i) of the Company Disclosure Schedule lists all Open Source Material that, to the knowledge of the Company, has been incorporated into any Company Software or Company Product in any way, identifies the license terms applicable thereto (complete copies of which have been made available to Parent) and describes the manner in which such Open Source Material was incorporated (such description shall include whether (and, if so, how) the Open Source Material was modified and/or distributed by the Company or any of its Subsidiaries and whether (and if so, how) such Open Source Material was incorporated into and/or linked with any Company Software or Company Product). Except as set forth in Part 3.6(h)(ii) of the Company Disclosure Schedule, to the knowledge of the Company, neither the Company nor any of its Subsidiaries has used Open Source Material in any manner that would or could (i) require the disclosure or distribution in source code, Source Material or equivalent human-readable form of any portion of any Company Software or Company Product, (ii) require the licensing of any portion of any Company Software or Company Product for the purpose of making derivative works, (iii) impose any restriction on the consideration to be charged for the distribution of any Company Software or Company Product, (iv) create, or purport to create, obligations for the Company with respect to Company IP or grant, or purport to grant, to any third party, any rights or immunities under Company IP or (v) impose any other material limitation, restriction, or condition on the right of the Company to use or distribute any Company Product. With respect to any Open Source Material that is or has been used by the Company or any of its Subsidiaries in any way, to the knowledge of the Company, the Company and each of its Subsidiaries has been and is in material compliance with all applicable licenses with respect thereto.

(i) The collection by the Company or any of its Subsidiaries of any personally identifiable information from any Persons (if any), and the storage and use of any such information have materially complied with all applicable Laws and the Company’s and its Subsidiaries’ privacy policies (copies of which have been made available to Parent).

3.7 Title to Assets; Real Property.

(a) The Company or one of its Subsidiaries owns, and has good title to, or in the case of assets purported to be leased by the Company or its Subsidiaries, leases and has valid leasehold interest in, each of the tangible assets reflected as owned or leased by the Company or its Subsidiaries on the Most Recent Balance Sheet (except for tangible assets sold or disposed of since that date and except for tangible assets being leased to the Company or one of its Subsidiaries) free of any liens or encumbrances (other than Permitted Encumbrances). Neither the Company nor any Subsidiary owns any real property or interest in real property nor has the Company or any Subsidiary ever owned any real property or interest in real property.

(b) Part 3.7(b) of the Disclosure Schedule contains a complete and accurate list of all of the existing leases, subleases, licenses, or other agreements (collectively, the “ Real Property Leases ”) under which the Company or any of its Subsidiaries uses or occupies or has the right to use or occupy, now or in the future, any real property (the “Leased Premises ”). The Company has heretofore made available to Parent true, correct and complete copies of all Real Property Leases (including all modifications, amendments, supplements, consents, waivers and side letters thereto and all agreements in connection therewith, including all work letters, improvement agreements, estoppel certificates, subordination agreements, and

 

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guarantees). The Closing will not affect the enforceability against any Person of any Real Property Lease or any rights of the Company or any of its Subsidiaries thereunder or otherwise with respect to any Leased Premises, including, the right to the continued use and possession of the Leased Premises for the conduct of business as presently conducted.

(c) The Real Property Leases are each in full force and effect and the Company or any of its Subsidiaries are not in breach of or default under, nor have they received written notice of any breach of or default under any Real Property Lease, and, to the knowledge of the Company, no event has occurred that with notice or lapse of time or both would constitute a breach or default thereunder by the Company or any other party thereto. Neither the Company nor any of its Subsidiaries have transferred or assigned any interest in any Real Property Lease, nor have they subleased or otherwise granted rights of use or occupancy of any of the premises described therein to any other person or entity. The Company or a Subsidiary currently occupies all of the Leased Premises for the operation of its business and there is no other person or entity with a right to occupy the Leased Premises.

(d) The Leased Premises and the personal property owned or leased by the Company or any of its Subsidiaries are in good operating condition and repair and free from any material defects, reasonable wear and tear excepted, and are suitable for the uses for which they are being used in all material respects. The operations of the Company and each of its Subsidiaries do not, nor to the Company’s knowledge, do any Leased Premises violate in any material respect any applicable building code, zoning requirement or other law relating to such property or operations thereon. To the knowledge of the Company, (i) there are no laws, statutes, rules, regulations or orders now in existence or under active consideration by any Governmental Authority which are reasonably likely to require the tenant of any Leased Premises to make any expenditure in excess of $25,000 to modify or improve such Leased Premises to bring it into compliance therewith, and (ii) the Company or any of its Subsidiaries shall not be required to expend more than $25,000 in the aggregate under all Real Property Leases to restore the Leased Premises at the end of the term of the applicable Real Property Lease to the condition required under the Real Property Lease (assuming the conditions existing in such Leased Premises as of the date hereof). Neither the Company, nor any of its Subsidiaries, owe any brokerage commissions or finders fees with respect to any Leased Premises, nor would the Company or any of its Subsidiaries owe any such fees if any existing Real Property Lease were renewed pursuant to any renewal options contained in such Real Property Lease. The Company and each of its Subsidiaries have performed all of their obligations under any termination agreements pursuant to which it has terminated any leases of real property that are no longer in effect and which were used in the operation of the business, and have no continuing liability with respect to such terminated real property leases.

3.8 Contracts. Part 3.8 of the Company Disclosure Schedule contains a list of each of the following Contracts, whether oral or written, to which the Company or any of its Subsidiaries is a party:

(a) each Contract that would be required to be filed as an exhibit to a Registration Statement on Form S-1 under the Securities Act or an Annual Report on Form 10-K pursuant to Item 601(b)(10) of Regulation S-K promulgated under the Exchange Act (if such registration statement or report was filed by the Company with the SEC on the date of this Agreement);

 

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(b) each Contract that restricts in any material respect the ability of the Company or any of its Subsidiaries to compete in any geographic area or line of business;

(c) each partnership, joint venture or other agreement pursuant to which revenue or income is or would be shared with another party;

(d) each indemnification or employment Contract with any director, officer or employee of the Company or its Subsidiaries;

(e) each employment Contract with any Employee requiring severance payments and each employment Contract with any Employee that is not terminable by the Company upon 30 days or less notice without cost or other liability to the Company or any of its Subsidiaries;

(f) each loan or credit agreement, indenture, mortgage, note or other Contract evidencing indebtedness for money borrowed by the Company or any of its Subsidiaries from a third party lender, and each Contract pursuant to which any such indebtedness for borrowed money is guaranteed by the Company or any of its Subsidiaries;

(g) each customer or supply Contract (excluding purchase orders given or received in the ordinary course of business) under which the Company or any Subsidiary of the Company paid or received in excess of $250,000 in fiscal year 2007, or is expected to pay or receive in excess of $250,000 in fiscal year 2008;

(h) each material “single source” supply Contract pursuant to which goods or materials are supplied to the Company or any Subsidiary of the Company from an exclusive source;

(i) each material exclusive sales representative, distribution or drop-ship Contract;

(j) each collective bargaining agreement;

(k) each Real Property Lease;

(l) each lease or rental Contract involving personal property (and not relating primarily to real property) pursuant to which the Company or any of its Subsidiaries is required to make rental payments in excess of $250,000 per year;

(m) each consulting Contract that is not terminable by the Company or any of its Subsidiaries on notice of 90 days or less;

(n) each Contract relating to the acquisition, sale or disposition of any material business unit or product line of the Company and its Subsidiaries that occurred after December 31, 2003;

 

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(o) any Contract relating to the creation of a Lien (other than Permitted Encumbrances) with respect to any asset of the Company or any of its Subsidiaries;

(p) any commercial Contract with the federal government, any foreign government, any state or local government or any division, subdivision, department, agency or instrumentality thereof;

(q) any material non-disclosure, confidentiality or similar agreement pursuant to which the Company or its Subsidiaries has ongoing obligations, including any such agreements that are being negotiated, but have not yet been executed;

(r) any current Contract that provides for indemnification or any guaranty (in each case, under which the Company has continuing obligations as of the date hereof), other than any Contract providing for indemnification entered into in connection with the distribution, sale or license of the Company Products in the ordinary course of business, which indemnification does not materially differ from the provisions embedded in Company’s standard forms of customer agreements as provided or made available to Parent;

(s) any Contract with a third party with respect to the development of any Intellectual Property Rights other than Contracts with the Company’s professional legal, financial or business advisors with respect to Intellectual Property Rights that are not incorporated into, used in or necessary for any Company Product;

(t) any Contract with non-solicitation or non-hire provisions pursuant to which the Company has ongoing obligations; and

(u) each Contract under which the Company is liable for benefits (including but not limited to severance pay, accelerated vesting, bonuses, and relocation expenses) to be provided to any Employee, director or officer upon or in connection with a change in control of the Company or any of its Subsidiaries.

Each Contract listed in Part 3.8 or Part 3.6 of the Company Disclosure Schedule shall be referred to as a “ Material Contract ”. There are no existing material breaches or defaults on the part of the Company or any of its Subsidiaries under any Material Contract; and, to the knowledge of the Company, there are no existing material breaches or defaults on the part of any other Person under any Material Contract. Each Material Contract is valid, has not been terminated prior to the date of this Agreement, is enforceable against the Company or the applicable Subsidiary of the Company that is a party to such Material Contract, and, to the knowledge of the Company, is enforceable against the other parties thereto, subject to (i) laws of general application relating to bankruptcy, insolvency and the relief of debtors, and (ii) rules of law governing specific performance, injunctive relief and other equitable remedies. The Company has made available to Parent copies (or in the case of oral agreements, a written summary) of each Material Contract, together with all amendments and supplements thereto.

3.9 Compliance with Legal Requirements. The Company and its Subsidiaries are in compliance in all material respects with all Legal Requirements applicable to their businesses. Since January 1, 2005, neither the Company nor any Subsidiary has (a) received any written notice from any Governmental Entity regarding any actual or possible violation of, or failure to

 

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comply with any material provision of, any Legal Requirement or (b) filed or otherwise provided any written notice to any Governmental Entity regarding any actual or possible material violation of, or failure to comply with any material provision of, any Legal Requirement, which notice in either case remains outstanding or unresolved.

3.10 Export and Import Control Laws.

(a) The Company and each of its Subsidiaries have complied in all material respects with all applicable export and reexport control laws and regulations (“ Export Controls ”), including but not limited the Export Administration Regulations (15 C.F.R. §§ 730-774); the International Traffic in Arms Regulations (22 C.F.R. §§ 120-130); the Foreign Assets Control Regulations (31 C.F.R. §§ 500-598); the Customs Regulations (19 C.F.R. §§ 1-357) and any applicable anti-boycott compliance regulations. To the knowledge of the Company, neither the Company nor any of its Subsidiaries has directly or indirectly sold, exported, reexported, transferred, diverted, or otherwise disposed of any products, software, or technology (including products derived from or based on such technology) to any destination, entity, or person prohibited by the laws or regulations of the United States, without obtaining prior authorization or a license exception from the competent government authorities as required by those laws and regulations. To the knowledge of the Company, the Company and its Subsidiaries are in compliance with all applicable import laws and regulations (“ Import Restrictions ”), including Title 19 of the U.S. Code and Title 19 of the Code of Federal Regulations.

(b) Part 3.10 of the Company Disclosure Schedule lists all of the Export Control Classification Numbers for Company Products. No Company Products require a license for the export of commercial encryption items.

(c) No action, proceeding, writ, injunction, claim, request for information or subpoena is pending, or the Company’s knowledge, threatened, concerning or relating to any export or import activity of the Company or any Subsidiary. No voluntary self disclosures have been filed by or for the Company or any of its Subsidiaries with respect to any violations of Export Controls and Import Restrictions.

3.11 Legal Proceedings; Orders.

(a) There is no Legal Proceeding pending (or, to the knowledge of the Company, threatened) against the Company or any of its Subsidiaries that (i) involves an amount in controversy in excess of $250,000 or the subject matter of which involves allegations of fraud or intentional or willful misrepresentation by the Company or its Subsidiaries, (ii) seeks material injunctive relief, or (iii) would, individually or in the aggregate with all other pending or threatened Legal Proceedings, have a Company Material Adverse Effect.

(b) To the knowledge of the Company, there is no Legal Proceeding pending or threatened against any current or former director or officer of the Company or any of its Subsidiaries (in their respective capacities as such), whether or not naming the Company or any of its Subsidiaries.

(c) There is no court order or judgment specific to the Company or any of its Subsidiaries to which the Company or any of its Subsidiaries is subject.

 

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(d) No investigation or audit by any Governmental Entity with respect to the Company or any of its Subsidiaries is pending or, to the knowledge of the Company, is being threatened.

(e) To the knowledge of the Company, no Governmental Entity is challenging the right of the Company or any Subsidiary to design, manufacture, license, offer or sell any of its products or services.

3.12 Governmental Authorizations. As of the date of this Agreement, the Company and its Subsidiaries hold all material Governmental Authorizations necessary to enable them to conduct their respective businesses in the manner in which such businesses, respectively, are currently being conducted. Such material Governmental Authorizations held by the Company and its Subsidiaries are valid and in full force and effect. The Company and its Subsidiaries are in material compliance with the terms and requirements of such Governmental Authorizations. Since January 1, 2006, neither the Company nor any Subsidiary has received any written notice from any Governmental Entity regarding (a) any actual or possible violation of or failure to comply with any term or requirement of any material Governmental Authorization, or (b) any actual or possible revocation, withdrawal, suspension, cancellation, termination or modification of any material Governmental Authorization.

3.13 Tax Matters.

(a) All material Tax Returns required to have been filed by the Company and its Subsidiaries (i) have been filed on or before the applicable due date (as such due date may have been extended) and (ii) have been prepared in material compliance with applicable Legal Requirements. All Taxes required to have been paid have been timely paid. The Company is not and has never been a United States real property holding corporation within the meaning of Section 897(c)(2) of the Code.

(b) The Most Recent Balance Sheet fully accrues the material liabilities of the Company and its Subsidiaries for Taxes with respect to all periods through June 30, 2008 in accordance with GAAP. The Company will establish, in the ordinary course of business, appropriate reserves for the payment of Taxes due and payable by the Company and its Subsidiaries for the period from June 30, 2008 through the Acceptance Time.

(c) The Company and its Subsidiaries have timely paid or withheld with respect to their employees (and paid over any amounts withheld to the appropriate Governmental Entity) all federal and state income Taxes, Federal Insurance Contribution Act, Federal Unemployment Tax Act and other similar Taxes required to be paid or withheld.

(d) As of the date of this Agreement, (i) there are no examinations or audits of any Tax Return currently underway, (ii) no extension or waiver of the limitation period applicable to any Tax Return is in effect, (iii) no Legal Proceeding is pending (or, to the knowledge of the Company, is being overtly threatened) by any Tax authority against the Company in respect of any material Tax, (iv) there are no unsatisfied liabilities for Taxes with respect to any notice of deficiency or similar document received by the Company or any of its Subsidiaries with respect to any material Tax (other than liabilities for Taxes asserted under any

 

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such notice of deficiency or similar document which are being contested in good faith), (v) there are no liens for material Taxes (other than Permitted Encumbrances) upon any of the assets of the Company or any of its Subsidiaries, and (vi) the Company has not entered into or become bound by any agreement or consent pursuant to former Section 341(f) of the Code. The Company is not required to include any adjustment in taxable income for any Tax period pursuant to Section 481 or 263A of the Code as a result of transactions or events occurring, or accounting methods employed, prior to the date of this Agreement or currently contemplated by the Company. The Company has not been a member of any combined, consolidated or unitary group (other than the group of which the Company is currently a member) for which it is or will be liable for Taxes under principles of Section 1.1502-6 of the Treasury Regulations.

(e) Neither the Company nor any of its Subsidiaries has constituted either a “distributing corporation” or a “controlled corporation” in a distribution of stock intended to qualify for tax-free treatment under Section 355 of the Code (A) in the two years prior to the date of this Agreement or (B) in a distribution which otherwise constitutes part of a “plan” or “series of related transactions” (within the meaning of Section 355(e) of the Code) that includes the Merger.

(f) Neither the Company nor any of its Subsidiaries has engaged in a “reportable transaction,” as set forth in Treas. Reg. § 1.6011-4(b), including any “listed transaction” as defined in Treas. Reg. § 1.6011-4(b)(2).

(g) Neither the Company nor any of its Subsidiaries have received a written notice from any Governmental Entity in any jurisdiction in which the Company and its Subsidiaries do not currently pay Tax claiming that either the Company or any of its Subsidiaries is subject to Tax in such jurisdiction.

(h) There is no agreement between the Company or any of its Subsidiaries and any employee or independent contractor of the Company or any of its Subsidiaries that will give rise to any material payment that would not be deductible pursuant to Section 280G or Section 162 of the Code. Neither the Company nor any of its Subsidiaries is a party to any material Tax indemnity agreement, Tax sharing agreement, Tax allocation agreement or similar Contract.

3.14 Employee Benefit Plans.

(a) The Company has provided or made available to Parent copies of all material employee benefit plans, policies, practices, Contracts, agreements, programs or other arrangements providing for compensation, severance, termination pay, deferred compensation, stock or stock related awards, fringe benefits, welfare benefits or other remuneration maintained or contributed to by the Company or any of its Subsidiaries for the benefit of any Employee (the “ Company Plans ”).

(b) Each Company Plan that is intended to be qualified under Section 401(a) of the Code has received a favorable determination letter (or opinion letter, if applicable) from the U.S. Internal Revenue Service stating that such Company Plan is so qualified. Each Company Plan has been operated in material compliance with its terms and with all applicable Legal Requirements.

 

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(c) To the extent applicable, each Company Plan in a foreign jurisdiction (“ International Company Plan ”) has been approved by the relevant taxation and other Governmental Entity so as to enable: (i) the Company or any of its Subsidiaries and the participants and beneficiaries under the relevant International Company Plan and (ii) in the case of any International Company Plan under which resources are set aside in advance of the benefits being paid (a “ Funded International Company Plan ”), the assets held for the purposes of the Funded International Company Plans, to enjoy the most favorable taxation status possible and the Company is not aware of any ground on which such approval may cease to apply.

(d) All contributions, premiums and other payments required to be made with respect to any Company Plan have been timely made under applicable Legal Requirements, any applicable collective bargaining agreement and the terms of such Plan. To the knowledge of the Company, no event has occurred and there currently exists no condition or set of circumstances in connection with which the Company or any of its Subsidiaries could reasonably be expected to be subject to any material liability under the terms of any Company Plan, ERISA, the Code or codes of practice issued by any Governmental Entity, collective bargaining agreement or any other applicable Legal Requirements. Except as required by Legal Requirements, neither the Company nor any of its Subsidiaries has any plan or commitment to amend or establish any new Company Plan or to increase any benefits under any Company Plan.

(e) There are no Legal Proceedings pending or, to the knowledge of the Company, threatened on behalf of or against any Company Plan, the assets of any trust under any Company Plan, or the plan sponsor, plan administrator or any fiduciary or any Company Plan with respect to the administration or operation of such plans, other than routine claims for benefits that have been or are being handled through an administrative claims procedure.

(f) None of the Company, any of its Subsidiaries, or, to the knowledge of the Company, any of their respective directors, officers, Employees or agents has, with respect to any Company Plan, engaged in or been a party to any non-exempt “prohibited transaction,” as such term is defined in Section 4975 of the Code or Section 406 of ERISA, which could reasonably be expected to result in the imposition of a material penalty assessed pursuant to Section 502(i) of ERISA or a material tax imposed by Section 4975 of the Code, in each case applicable to the Company, any of its Subsidiaries or any Company Plan or for which the Company or any of its Subsidiaries has any indemnification obligation.

(g) No Company Plan is (1) a “defined benefit plan” (as defined in Section 414 of the Code), (2) a “multiemployer plan” (as defined in Section 3(37) of ERISA), (3) a “multiple employer plan” (as defined in Section 4063 or 4064 of ERIS