UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
SCHEDULE 14A
(Rule 14a-101)
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the
Registrant
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Filed by a Party other than the Registrant
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Check the appropriate box:
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Preliminary Proxy Statement
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Confidential, For Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material Pursuant to § 240.14a-12
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Zoran Corporation
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(Name of Registrant as Specified in its Charter)
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(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
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Payment of Filing Fee (Check the appropriate box):
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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Title of each class of securities to which transaction applies:
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Aggregate number of securities to which transaction applies:
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Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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Proposed maximum aggregate value of transaction:
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Fee paid previously with preliminary materials.
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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify
the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
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(1)
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Amount previously paid:
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Form, Schedule or Registration Statement No.:
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Filing Party:
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Date Filed:
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Zoran Corporation
1390 Kifer Road
Sunnyvale, California 94086
(408) 523-6500 July 29, 2011
Dear Zoran Stockholder:
You are cordially invited to attend a special meeting of
stockholders of Zoran Corporation, a Delaware corporation, to be held at 10:00 a.m., local time, on August 30, 2011, at Zorans principal executive offices located at 1390 Kifer Road, Sunnyvale, California. Enclosed are a notice of special
meeting of stockholders, a proxy statement/prospectus and a proxy card relating to Zorans special meeting.
On June 16,
2011, the board of directors of Zoran approved an amended and restated merger agreement providing for a merger of Zoran with a wholly owned subsidiary of CSR plc, a company organized under the laws of England and Wales. We are sending you this proxy
statement/prospectus to ask you to vote on the adoption of the merger agreement at the special meeting.
If the merger is
completed, Zoran stockholders will have the right to receive a combination of $6.26 in cash in United States dollars, without interest, plus 0.14725 of an American Depositary Share of CSR (CSR ADS) (which will be equivalent to 0.589 CSR
ordinary shares) for each share of Zoran common stock they own (other than shares held by Zoran, CSR or any of their respective wholly-owned subsidiaries, or shares for which appraisal rights are properly exercised) as of immediately prior to the
effective time of the merger. Each CSR ADS will represent four CSR ordinary shares, par value £0.001. CSR has applied to list the CSR ADSs on The NASDAQ Stock Market under the symbol CSRE. CSR ordinary shares are listed on the
London Stock Exchange under the symbol CSR.L.
Based on the closing stock price for CSR on July 20, 2011, the
consideration payable for each share of Zoran common stock in the merger is worth approximately $9.02 per share, implying an equity value of approximately $475 million for all outstanding shares and in-the-money options in accordance with the
treasury method. Immediately following the consummation of the merger, current Zoran stockholders are expected to own approximately 17% of CSR, and CSR shareholders are expected to own the remaining approximately 83%.
The board of directors of Zoran recommends that you vote FOR the adoption of the merger agreement at the special meeting.
We and CSR cannot complete the merger unless the merger agreement is adopted by the affirmative vote of a majority of
the shares of Zoran common stock outstanding as of July 18, 2011. Detailed information concerning the proposed merger is set forth in the accompanying proxy statement/prospectus, which you are urged to read carefully and in its entirety. In
particular, you should consider the
Risk Factors
beginning on page 29.
The accompanying proxy
statement/prospectus explains (among other things) the proposed merger, provides information relating to CSR and the CSR ADSs you would receive as a portion of the merger consideration, and provides information concerning the special meeting.
Please read these materials carefully and in their entirety
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We look forward to welcoming those stockholders who
are able to be present at the meeting; however, whether or not you plan to attend in person it is important that your shares be represented. Accordingly, after reading the proxy statement/prospectus, please return your proxy, by completing, dating,
signing and returning the enclosed proxy in the prepaid envelope, or by submitting your proxy by telephone or through the Internet as described in the instructions included with your proxy card, to ensure that your shares will be represented.
Your shares cannot be voted unless you (i) submit your proxy by telephone or through the Internet, (ii) sign, date and return the enclosed proxy, or (iii) attend the special meeting in person. If you hold your shares of Zoran
common stock in street name through a bank, broker or other nominee, please direct your bank, broker or other nominee to vote in accordance with the instructions you received from your bank, broker or other nominee. The failure to vote
in person or by proxy will have the same effect as a vote against the merger.
If you have any questions about the merger or need assistance voting your shares, please call MacKenzie Partners, Inc., the proxy solicitation firm assisting Zoran,
toll-free at (800) 322-2885 or at (212) 929-5500 (call collect).
The board of directors and management of Zoran look
forward to seeing you at the special meeting.
Sincerely,
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Levy Gerzberg, Ph.D.
President and Chief Executive Officer
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Zoran Corporation
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
To Be Held on August 30, 2011
A special meeting of stockholders of Zoran
Corporation will be held at 10:00 a.m., local time, on August 30, 2011, at Zorans principal executive offices located at 1390 Kifer Road, Sunnyvale, California.
The special meeting is being held for the following purposes:
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To consider and vote upon a proposal to adopt the Amended and Restated Agreement and Plan of Merger, dated as of June 16, 2011, by and among Zoran, CSR plc and Zeiss
Merger Sub, Inc., a wholly owned subsidiary of CSR plc, pursuant to which Zeiss Merger Sub, Inc. will merge with and into Zoran, with Zoran surviving the merger as a wholly owned subsidiary of CSR plc; and
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To approve the adjournment of the special meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the meeting
to adopt the merger agreement.
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The accompanying proxy statement/prospectus describes the merger agreement and
the proposed merger in detail and is intended to be used at the special meeting and any adjournments or postponements thereof.
The board of directors of Zoran recommends that Zoran stockholders vote FOR the adoption of the merger agreement.
The board of directors of Zoran has set the close of business on July 18, 2011, as the record date for determining
stockholders entitled to receive notice of the meeting and to vote at the meeting and any adjournments or postponements thereof. Only holders of record of Zoran common stock at the close of business on such date are entitled to receive notice of and
to vote at the special meeting and at any adjournment or postponement thereof. A list of stockholders eligible to vote at the special meeting will be available for inspection at the special meeting, and at the executive offices of Zoran during
regular business hours for a period of not less than ten days prior to the special meeting.
The following persons are
eligible for admission to the special meeting: (i) all stockholders of record at the close of business on July 18, 2011; (ii) persons holding proof of beneficial ownership as of the record date, such as a letter or account statement from
such persons brokers; (iii) persons who have been granted proxies; and (iv) such other persons that Zoran, in its sole discretion, may elect to admit.
Under Delaware law, Zoran stockholders who do not vote in favor of the adoption of the merger agreement will have the right to seek appraisal of the fair value of their shares of Zoran common stock as
determined by the Delaware Court of Chancery if the merger is completed, but only if they submit a written demand for such an appraisal prior to the vote on the merger agreement and comply with the other Delaware law procedures explained in the
accompanying proxy statement/prospectus.
All persons wishing to be admitted must present photo identification and proper
proof of share ownership. If you plan to attend the special meeting, please check the appropriate box on your proxy card or register your intention when voting by using the telephone or the Internet, according to the instructions provided in your
proxy card.
By order of the board of directors,
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Levy Gerzberg, Ph.D.
President and Chief Executive Officer
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Sunnyvale, California
July 29, 2011
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YOUR VOTE IS IMPORTANT.
Please return your proxy as soon as possible,
whether or not you expect to attend the special meeting in person. You may submit your proxy by telephone or through the Internet by following the instructions on the enclosed proxy card or voting form or by completing, dating and signing the
enclosed proxy card and returning it in the enclosed postage prepaid envelope. If you are a stockholder of record, you may revoke your proxy at any time before the special meeting. If you are a stockholder of record and you attend the special
meeting and vote in person, your proxy vote will be revoked.
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REFERENCE TO ADDITIONAL INFORMATION
CSR files annual reports and furnishes other reports and information with the SEC. Zoran files annual, quarterly and other reports, proxy
statements and other information with the SEC. This proxy statement/prospectus includes important business and financial information about Zoran and CSR from documents that are not included in, or delivered with, this proxy statement/prospectus. CSR
has filed a registration statement on Form F-4 with the SEC. You can obtain documents related to Zoran and CSR, without charge, by requesting them in writing or by telephone from the appropriate company.
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Zoran Corporation
Corporate Secretary
1390 Kifer Road
Sunnyvale, California 94086
United States of America
Phone: (408) 523-6500
Email: legal@zoran.com
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CSR plc
Investor Relations
Churchill House
Cambridge Business Park
Cowley Road
Cambridge CB4 0WZ
United Kingdom
Phone: +44 (0) 1223 692 000
Email: Cynthia.Alers@csr.com
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In order to receive timely delivery of requested documents in advance of the special meeting, you
should make your request no later than August 23, 2011.
You may also obtain copies of these documents, without charge,
from the website maintained by the SEC at www.sec.gov.
See Where You Can Find More Information beginning on
page 208.
TABLE OF CONTENTS
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QUESTIONS AND ANSWERS
The following are some of the questions that you, as a stockholder of Zoran, may have regarding the proposed merger and the other
matters being considered at the stockholders meeting and the answers to those questions. Zoran urges you to read carefully the remainder of this proxy statement/prospectus because the information in this section does not provide all the
information that might be important to you with respect to the proposed merger and the other matters being considered at the stockholders meeting. Additional important information is also contained in the appendices to this proxy
statement/prospectus.
Questions about the Merger
What is the proposed transaction on which I am being asked to vote?
You are being asked to vote to adopt the merger agreement entered into by and among Zoran, CSR and Zeiss Merger Sub, Inc., a wholly owned subsidiary of CSR, pursuant to which Zeiss Merger Sub, Inc. will
merge with and into Zoran, with Zoran surviving the merger as a wholly owned subsidiary of CSR. CSR and its subsidiaries following the merger are referred to as the Combined Company.
Zoran, CSR and a wholly-owned merger subsidiary of CSR entered into a merger agreement as of February 20, 2011, which is referred to
herein as the original merger agreement. Since the proposed merger was originally announced, several developments have impacted the business outlook of Zoran, including the earthquake and tsunami in Japan and the recent announcement by
Cisco Systems that it will exit its Flip consumer video camcorder segment. These developments affected Zorans outlook for its business and results of operations and led to discussions with CSR regarding the proposed merger. As of June 16,
2011, the parties executed a new agreement amending and restating the original merger agreement that provides for revised terms for the merger as described in this proxy statement/prospectus. All references in this proxy statement/prospectus to the
merger agreement refer to the amended and restated merger agreement executed as of June 16, 2011, unless otherwise indicated.
What will
the Zoran stockholders receive in the merger?
If the merger is completed, you will have the right to receive a combination
of $6.26 in cash, without interest, and 0.14725 of a CSR ADSs as consideration for each share of Zoran common stock you held. Each CSR ADS represents four CSR ordinary shares, so 0.14725 of a CSR ADSs is equivalent to 0.589 CSR ordinary shares. CSR
will not issue fractional CSR ADSs in the merger. Instead, CSR will pay you cash for any fractional CSR ADS that you are otherwise entitled to receive.
The transaction implies a value of $9.02 per share of Zoran common stock, or an equity value for Zoran of approximately $475 million for all outstanding shares and in-the-money options in accordance with
the treasury method, based on the closing price for CSR ordinary shares of £2.904 as of July 20, 2011, converted to a price of $4.69 using a U.S. dollar/GBP exchange rate of $1.6139 per £1.00 as of that date, which was the latest
practicable business day before the publication of this proxy statement/prospectus, and assuming that CSR ADSs will trade at four times the price of CSR ordinary shares. Based on the closing price for CSR ordinary shares and using a U.S. dollar/GBP
exchange rate on June 16, 2011, which was the last trading day before the amended and restated merger agreement was publicly announced, and assuming that CSR ADSs will trade at four times the price of CSR ordinary shares, the transaction implied a
value of $9.19 per share of Zoran common stock, or an equity value of approximately $484 million. This represented a premium to Zoran stockholders of approximately 28% over Zorans closing stock price on June 16, 2011. Zorans implied
enterprise value on June 16, 2011, calculated as Zorans implied equity value of approximately $484 million minus total cash and cash equivalents as of May 31, 2011, was approximately $244 million.
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What is a CSR ADS?
An American Depositary Share, or ADS, is a security that allows persons in the United States to more easily hold and trade interests in companies incorporated or organized in a non-U.S. country. CSR is a
company organized under the laws of England and Wales that issues ordinary shares that are equivalent in many respects to common stock of a U.S. company. Each CSR ADS represents four CSR ordinary shares. CSR has applied to list the CSR ADSs on The
NASDAQ Stock Market under the symbol CSRE. JPMorgan Chase Bank, N.A. is the depositary of the CSR ordinary shares underlying the CSR ADSs and will be responsible for issuing CSR ADSs to Zoran stockholders.
Will Zoran stockholders be able to trade the CSR ADSs that they receive in the transaction?
Yes. CSR has applied to list the CSR ADSs on The NASDAQ Stock Market under the symbol CSRE. CSR ADSs received in exchange for
shares of Zoran common stock in the transaction will be freely transferable under United States federal securities laws.
Can I receive CSR
ordinary shares in the merger instead of CSR ADSs?
No. However, you may turn in your CSR ADSs at the depositarys
corporate trust office or by providing appropriate instructions to your broker. Upon payment of the fees provided in the deposit agreement and any applicable taxes, the depositary will deliver the CSR ordinary shares underlying the CSR ADSs to you.
What vote is required by Zoran stockholders to adopt the merger agreement or adjourn the special meeting if necessary or appropriate to
solicit additional proxies?
The merger agreement must be adopted by the holders of a majority of all outstanding shares of
Zoran common stock entitled to vote at the special meeting. The adjournment of the special meeting, if necessary or appropriate, to solicit additional proxies requires the affirmative vote of a majority of the shares present in person or by proxy at
the Zoran special meeting. You are entitled to vote on the merger agreement if you held Zoran common stock at the close of business on the record date, which is July 18, 2011. On the record date, 50,109,237 shares of Zoran common stock were
outstanding and entitled to vote. The issuance of the CSR ordinary shares underlying the CSR ADSs in connection with the merger is also subject to a vote of CSRs shareholders.
How does Zorans board of directors recommend that I vote my shares?
Zorans board of directors recommends that you vote
FOR
the proposal to adopt the merger agreement.
Are Zoran stockholders entitled to appraisal rights?
Record holders of Zoran common stock who do not vote in favor of the merger proposal and otherwise comply with the requirements and procedures of Section 262 of the Delaware General Corporation Law, which
we refer to in this proxy statement/prospectus as the DGCL, are entitled to exercise their rights of appraisal, which generally entitle stockholders to receive a cash payment equal to the fair value of their Zoran common stock in
connection with the merger. A detailed description of the appraisal rights and procedures available to Zoran stockholders is included in The MergerAppraisal Rights beginning on page 104. The full text of Section 262 of the DGCL is
attached as Appendix E to this proxy statement/prospectus.
Can the value of the transaction change between now and the time the merger is
consummated?
Yes, the value of the non-cash portion merger consideration can change. The exchange ratio that applies to
the stock portion of the merger consideration is a fixed exchange ratio, meaning that Zoran stockholders will receive (in addition to $6.26 in cash in United States dollars) 0.14725 of a CSR ADS (which is equivalent to
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0.589 CSR ordinary shares) for each share of Zoran common stock owned immediately prior to the effective time of the merger (other than shares held by Zoran, Parent or any of their respective
wholly-owned subsidiaries, or shares for which appraisal rights are properly exercised) regardless of the trading price of CSR ordinary shares on the London Stock Exchange on the effective date of the merger. However, the implied market value of the
CSR ADSs that Zoran stockholders will receive in the merger will increase or decrease as the trading price of CSR ordinary shares increases or decreases, and may be different at the time the merger is consummated than it was as of the last trading
day before the merger agreement was signed or will be at the time of the special meeting. The market price of CSR ordinary shares could be higher or lower at any time prior to the consummation of the merger. Additionally, fluctuations in the
exchange rate between the U.S. dollar and the pound sterling could affect the value of the non-cash portion merger consideration. Zoran stockholders are urged to obtain current trading prices for CSR ordinary shares on the London Stock
Exchange.
After the merger, how much of the Combined Company will Zoran stockholders own?
Upon closing of the transaction, Zoran stockholders are expected to own approximately 17%, and CSR shareholders are expected to own
approximately 83%, of the Combined Company.
What will happen to Zorans outstanding options and stock-based awards in the merger?
As of the closing of the transaction, each outstanding and unexercised stock option to acquire Zoran common stock and each
restricted stock unit, or RSU, with respect to Zoran common stock will be assumed by CSR. The assumed options and RSUs will be converted into options or RSUs, respectively, which shall, subject to the prevailing terms and conditions of grant, be
satisfied by the issuance of either CSR ADSs or CSR ordinary shares, at the election of CSR. The number of CSR ADSs or CSR ordinary shares issuable for each converted option or RSU will equal the number of Zoran common shares subject to the award
multiplied by an exchange ratio derived from the merger consideration, rounded down to the nearest share for options and rounded to the nearest share for RSUs. The exchange ratio for awards settled in CSR ADSs will be 0.14725 plus the quotient
obtained by dividing (x) $6.26 converted to pounds, by (y) the product of four multiplied by the trading price for a CSR ordinary share on the day prior to the merger. The exchange ratio for awards settled in CSR ordinary shares will be 0.589 plus
the quotient obtained by dividing (x) $6.26 converted to pounds, by (y) the trading price for a CSR ordinary share on the day prior to the merger. In addition, the per share exercise price of each converted option will be adjusted by dividing the
current exercise price by the CSR ADS exchange ratio or the CSR ordinary share exchange ratio, depending on which security is issuable upon exercise, with the result rounded up to the nearest whole cent.
See the section entitled The Merger AgreementTreatment of Zoran Stock Options and Other Equity-Based Awards of this
proxy statement/prospectus.
Following consummation of the merger, arrangements will be put in place enabling Zoran employees
who hold options and RSUs to view details of the grants they hold, such options or RSUs having been converted using one or other of the ratios mentioned above. Arrangements will also be made enabling employees to exercise vested options or in the
event of automatic vesting, receive RSUs in the form of either CSR ADSs or CSR ordinary shares at the election of CSR. The employee can thereafter decide to hold the CSR ADSs or CSR ordinary shares issued to them or they can decide to sell on either
The NASDAQ Stock Market (for CSR ADSs) or the London Stock Exchange (for CSR ordinary shares). It is expected that these facilities will be with E*Trade in respect of employees who will receive CSR ADSs and Equiniti Limited for those employees who
will receive CSR ordinary shares.
What are the material U.S. federal income tax consequences of the merger for me?
The following statements are only a summary of the anticipated material U.S. federal income tax consequences of the merger and the
ownership of CSR ADSs to U.S. holders (as defined below) of Zoran common stock. It is expected that the merger will be a fully taxable transaction for U.S. federal income tax purposes. As a result, a U.S. holder of Zoran common stock generally will
recognize taxable gain or loss in the
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merger equal to the difference between (a) the amount of cash plus the fair market value (determined at the effective time of the merger) of the CSR ADSs received by such holder in the merger,
and (b) such holders adjusted tax basis in the Zoran common stock surrendered in the merger.
You are urged to
consult with your own tax advisor for a full understanding of the tax consequences of the merger to you.
For a more
detailed description of the material U.S. federal income tax consequences of the merger, please see the section entitled Material Tax ConsequencesMaterial U.S. Federal Income Tax Consequences of the Merger.
What are the material U.K. tax consequences of owning CSR ADSs for me?
The following statements are only a summary of the material U.K. tax consequences of owning CSR ADSs and are based on the same assumptions and reservations as are set out in the section entitled
Material Tax ConsequencesMaterial U.K. Tax Consequences of Owning CSR ADSs. Holders of CSR ADSs who are not resident or, in the case of individuals, ordinarily resident in the U.K. will not generally be liable to pay any U.K. tax
on dividends paid by CSR or be liable to pay any U.K. tax on capital gains realized on any disposal of their CSR ADSs, in each case as long as the relevant holder of CSR ADSs does not carry on a trade, profession or vocation in the U.K. through a
branch, agency or, in the case of a corporate holder of CSR ADSs, permanent establishment in connection with which its CSR ADSs are held. A charge to U.K. stamp duty reserve tax at 1.5% of the consideration paid will arise on the issue of the CSR
ordinary shares to, or to a nominee or agent for, the depositary, as a person whose business is or includes the issue of depositary receipts. This U.K. stamp duty reserve tax will be borne by CSR and will not reduce the consideration payable to
Zoran stockholders in the merger. The lawfulness of this 1.5% charge is currently subject to challenge before the U.K. courts. No U.K. stamp duty reserve tax will be payable in respect of a subsequent transfer of CSR ADSs and, in practice, no U.K.
stamp duty should need to be paid in respect of any such transfer.
You are urged to consult with your own tax advisor for
a full understanding of the U.K. tax consequences for you of owning CSR ADSs.
For a more detailed description of the
material U.K. tax consequences of owning CSR ADSs, see the section entitled Material Tax ConsequencesMaterial U.K. Tax Consequences of Owning CSR ADSs.
What are the material Israeli tax consequences of the merger?
The
following statements are only a summary of the material Israeli tax consequences of the merger. Zoran has requested tax rulings from the Israeli Tax Authority that would, among other things, exempt Zoran stockholders who meet certain conditions from
the application of Israeli tax withholding to payments of consideration in the merger to them. Discussions between Zoran and the Israeli Tax Authority regarding the scope of the rulings are ongoing. If and when the tax rulings are finalized, Zoran
will issue a press release and file a Form 8-K or other document with the SEC describing the scope of the exemptions provided by the rulings and detailing which Zoran stockholders are not covered by the exemptions and should instead seek to obtain
an individual exemption. Zoran intends to make available an advisor who will explain the process and information required to seek such an exemption.
As a consequence of the merger, holders of Zoran common stock will be treated as having sold their Zoran common stock in the merger. Because of Zorans operations in Israel, the Israeli Tax Authority
will view the consideration received by holders of Zoran common stock as subject to Israeli taxation. When an Israeli company is sold, regardless of whether the consideration in the sale is cash or stock, its stockholders may be subject to Israeli
taxation at the rate of 20% for individuals and 24% for corporations.
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Whether or not a particular stockholder is actually subject to Israeli capital gains tax in
connection with the merger, absent receipt by Zoran of a tax ruling from the Israeli Tax Authority prior to closing of the merger, all Zoran stockholders will be subject to Israeli tax withholding at the rate of 20% (for individuals) and 24% (for
corporations) on the gross consideration received in the merger (unless the stockholder requests and obtains an individual certificate of exemption from the Israeli Tax Authority, as described below), and CSR or the exchange agent will withhold and
deduct from the cash consideration which each Zoran stockholder is entitled to receive pursuant to the merger agreement an amount equal to 20% or 24%, as applicable, of the gross consideration (cash and ADSs) received in the merger by such
stockholder.
Zoran has filed a request for tax rulings from the Israeli Tax Authority with respect to (i) the application of
Israeli tax withholding to payments of consideration in the merger to Zoran stockholders and (ii) the application of Israeli tax withholding and other Israeli tax treatment applicable in respect of the merger to holders of Zoran stock options, RSUs
and common stock issued to certain employees. There can be no assurance that such rulings will be granted before the closing of the merger or at all.
It is expected that in no event will any holder of Zorans common stock who (i) is an Israeli resident for purposes of the Israeli Income Tax Ordinance (New Version), 1961, as amended (the
ITO) and does not hold its Zoran common stock through an Israeli broker or Israeli financial institution, (ii) acquired its shares of Zoran common stock before Zorans initial public offering on The NASDAQ Stock Market in 1995 (with
respect to such shares), or (iii) holds five percent or more of Zorans outstanding stock as of the closing date of the merger, be covered by the ruling being requested by Zoran, and, absent receipt of an individual exemption from the Israeli
Tax Authority, such a holder will be subject to Israeli tax withholding at the rate of 20% (for individuals) and 24% (for corporations) on the gross consideration received in the merger, and CSR or the exchange agent will withhold and deduct such
amounts in the manner described above. Certain additional categories of non-Israeli resident stockholders are also expected to be excluded from the scope of any eventual ruling granted by the Israeli Tax Authority, and the final determination of the
type of holders of Zoran common stock who will be included in such categories will be based on the outcome of the ongoing discussions with the Israeli Tax Authority.
Exemptions from Israeli tax withholding may also be available to certain holders of Zoran common stock under relevant tax treaties with Israel or under certain provisions of Israeli tax law. Regardless of
whether Zoran obtains the requested tax rulings from the Israeli Tax Authority, any holder of Zoran common stock who believes that it is entitled to such an exemption may separately apply to the Israeli Tax Authority to obtain a certificate of
exemption from withholding or an individual tax ruling providing for no withholding or withholding at a reduced rate, and submit such certificate of exemption or ruling to the exchange agent at least three business days prior to the date of the
applicable payment of the merger consideration to such holder. If CSR or the exchange agent receive a valid exemption certificate or tax ruling (as determined in CSRs or the exchange agents discretion) at least three business days prior
to the date of the applicable payment, then the withholding (if any) of any amounts under the ITO, from the consideration payable shall be made only in accordance with the provisions of such Israeli tax certificate or tax ruling.
You are urged to consult with your own tax advisor for a full understanding of the tax consequences of the merger to you, including
the consequences under any applicable, state, local, foreign or other tax laws.
For a more detailed description of the
material Israeli tax consequences of the merger, see the section entitled Material Tax ConsequencesMaterial Israeli Tax Consequences of the Merger.
Why is Zoran proposing the transaction to its shareholders?
Zorans
board of directors has approved and declared advisable the merger, the merger agreement and the transactions contemplated by the merger agreement, and has declared that it is in the best interests of Zoran and Zoran stockholders that Zoran enter
into the merger agreement and consummate the merger. To review the Zoran boards reasons for the merger in greater detail, see the section entitled The MergerRecommendation of Zorans Board of Directors; Zorans Reasons
for the Merger.
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When is the merger expected to be completed?
CSR and Zoran expect to complete the merger promptly after they receive Zoran stockholder approval at the special meeting and CSR
shareholder approval at the CSR shareholders meeting. CSR and Zoran currently anticipate the merger will occur in the third quarter of 2011.
If the merger is completed, when can I expect to receive the merger consideration for my shares of Zoran common stock?
Promptly after the effective time of the merger, CSR will cause the exchange agent to mail to you a letter of transmittal and instructions
to effect your exchange of Zoran common stock for the merger consideration. After receiving the proper documentation from you, the exchange agent will cause the CSR ADSs to which you are entitled under the merger agreement to be issued to you in
uncertificated book-entry form to the account specified in your completed letter of transmittal (unless you have specifically requested to receive the CSR ADSs in physical form, in which case the exchange agent will forward to you an American
Depositary Receipt representing such CSR ADSs). In addition, the exchange agent will forward to you the cash portion of the merger consideration and any cash in lieu of any fractional CSR ADS to which you are entitled under the merger agreement.
More information on the documentation you are required to deliver to the exchange agent may be found under the section entitled The Merger AgreementConversion of Shares; Exchange of Certificates.
What happens if the merger is not completed?
If the merger agreement is not adopted by the Zoran stockholders or if the merger is not consummated for any other reason, Zoran stockholders will not receive the merger consideration in exchange for
their shares of Zoran common stock. Instead, Zoran will remain an independent public company and Zoran common stock will continue to be listed and traded on The NASDAQ Global Select Market. Under specified circumstances, Zoran may be required to pay
CSR a termination fee or CSR may be required to pay Zoran a termination fee, as described in the section entitled The Merger AgreementTermination Fees.
Has CSRs board of directors approved the merger?
Yes. CSRs
board of directors has unanimously determined that the merger will promote the success of CSR and its shareholders as a whole and is in the best interests of its shareholders as a whole, and therefore unanimously approved the merger agreement and
the transactions contemplated by it and has unanimously recommended that its shareholders vote in favor of the merger.
What vote is
required by CSRs shareholders?
The merger requires approval by a simple majority in number of those CSR shareholders
present and voting (either in person or by proxy) at a meeting of CSR shareholders, unless a poll is validly demanded. See Comparison of Rights of Zoran Stockholders and CSR ShareholdersCurrent Rights of CSR ShareholdersVoting
Rights. If a poll is demanded, the merger will require the approval of the holders of a simple majority of shares voting. This proxy statement/prospectus is not being used as a shareholder circular for the CSR shareholders meeting. A separate
circular will be sent to CSR shareholders in connection with the CSR shareholders meeting.
Where are CSR ordinary shares and CSR ADSs
listed?
CSR ordinary shares are listed on the London Stock Exchanges main market and are traded under the symbol
CSR.L. CSR has applied to list the CSR ADSs on The NASDAQ Stock Market under the symbol CSRE.
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How will trading in shares of Zoran common stock be affected by the completion of the merger?
Zoran common stock will be owned entirely by CSR as a result of the merger. Zoran common stock will be delisted from The
NASDAQ Global Select Market upon the consummation of the merger and will no longer be traded. Upon the consummation of the merger, your interest in shares of Zoran common stock will only represent the right to receive the merger consideration
issuable to you in the merger and cash in lieu of any fractional CSR ADSs.
Will employees be able to continue to purchase shares under the
Employee Stock Purchase Plan, or ESPP, after the merger?
No. Each outstanding right to purchase shares of Zoran common
stock under the ESPP will terminate prior to the completion of the merger. You may, however, purchase from Zoran as many whole shares of Zoran common stock as the balance of your account will allow. Any amounts remaining in your ESPP account after
any such purchase will be refunded to you.
Will I receive dividends from CSR on CSR ordinary shares underlying the CSR ADSs?
JPMorgan Chase Bank, N.A., referred to herein as the depositary, has agreed that, to the extent practicable, it will pay
to CSR ADS holders the cash dividends or other distributions it receives on the ordinary shares underlying the CSR ADSs, after converting any cash received into U.S. dollars and, in all cases, making any necessary deductions provided for in the
deposit agreement. The holder of CSR ADSs will receive these distributions in proportion to the number of ordinary shares underlying the CSR ADSs.
At the CSR annual general meeting held on May 18, 2011, CSR shareholders approved the CSR board of directors proposal to pay CSRs first dividend of £0.04 ($0.065, based on the exchange
rate on June 3, 2011) per share in respect of the 2010 financial year, representing 2/3 of a notional £0.06 ($0.098, based on the exchange rate on June 3, 2011) full year dividend that would have been paid if CSR had commenced payment of
dividends sooner. The dividend was paid on June 3, 2011 to CSR shareholders of record on May 13, 2011. CSR shareholders of record on August 19, 2011 will be entitled to receive CSRs next dividend payment. Because the merger will not
close on or prior to that date, Zoran stockholders will not participate in the dividend.
It is the CSR board of
directors intention to follow a progressive dividend policy that reflects the underlying growth prospects of CSR, as well as the long term outlook for growth in earnings per share and group cash flow. The CSR board of directors intends to pay
dividends on a semi-annual basis.
Who will manage the Combined Company?
Upon the consummation of the merger, CSRs board of directors will be expanded by the appointment of Dr. Levy Gerzberg, the
President and CEO of Zoran, as a non-executive director. The CSR board of directors will continue to be chaired by Ron Mackintosh, and the Combined Company will be headed by CSRs CEO Joep van Beurden. Will Gardiner will continue as CFO.
Information about the current CSR directors and executive officers can be found in the documents listed under the heading CSR SEC Filings in the section entitled Incorporation By Reference on page 209.
Will CSR proceed with the share buyback program announced in connection with the original merger agreement?
No. As a result of the revised terms under the merger agreement comprising cash of $6.26 without interest and 0.14725 CSR ADSs per share
of Zoran common stock as consideration, the previously announced share buyback program in connection with the original merger agreement will not continue.
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Questions about the Special Meeting
When and where will the special meeting of Zoran stockholders be held?
The special meeting of Zoran stockholders will be held at Zorans principal executive offices located at 1390 Kifer Road, Sunnyvale, California, on August 30, 2011, at 10:00 a.m., local time.
If my shares are held in street name by my broker, will my broker vote my shares for me?
You should instruct your broker to vote your shares, following the directions your broker provides. If you do not instruct your broker,
your broker will not have the discretion to vote your shares without your instructions.
Because the proposal to adopt the
merger agreement in this proxy statement/prospectus submitted to Zoran stockholders requires an affirmative vote of the holders of a majority of all outstanding shares of Zoran common stock for adoption, failure to instruct your broker to vote for
adoption the merger agreement will have the same effect as votes cast against the proposal to adopt the merger agreement.
What do I need
to do now?
You are urged to read this proxy statement/prospectus carefully, including its appendices and the documents
incorporated by reference herein. You may also want to review the documents referenced under Where You Can Find More Information and Incorporation by Reference beginning on pages 208 and 209 respectively, and consult
with your accounting, legal and tax advisors.
After carefully reading and considering the information contained in this proxy
statement/prospectus, if you do not hold your shares in street name, please fill out and sign the proxy card, and then mail your signed proxy card in the enclosed prepaid envelope as soon as possible so that your shares may be voted at
the special meeting. If you hold your shares in street name, follow the instructions in the previous question. Zorans board of directors recommends that you vote
FOR
the proposal to adopt the merger agreement.
You may also submit your proxy by telephone or through the Internet (for telephone and Internet voting instructions, see the section entitled The Zoran Special MeetingHow to Vote). Your proxy card will instruct the persons named on
the card to vote your shares at the stockholder meeting as you direct on the proxy card. If you sign and send in your proxy card and do not indicate how you want to vote, your proxy will be voted as Zorans board of directors recommends. If you
do not vote or you abstain, it will have the same effect as a vote against the proposal to adopt the merger agreement.
May I change
my vote after I have mailed my signed proxy card?
Yes. If you are stockholder of record, you may change your vote at any
time before your proxy is voted at the special meeting. You can do this in any of four ways. First, you can submit a proxy by telephone or through the Internet at a later time following instructions on the enclosed proxy card. Second, you can sign,
date and return a later-dated proxy card in the postage-paid envelope provided. Third, you can send a written notice stating that you want to revoke your proxy, to the Corporate Secretary of Zoran at the following address:
Corporate Secretary
Zoran Corporation
1390 Kifer Road
Sunnyvale, California 94086
Fourth, you can attend the special meeting and vote in person. Simply attending the meeting, however, will not revoke your proxy; you must vote at the
meeting in order to do so.
If you have instructed a broker to vote your shares, you must follow directions received from your
broker to change your vote.
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Should I send in my stock certificates now?
No. After the merger is consummated, you will receive written instructions for exchanging your stock certificates.
What should I do if I receive more than one set of voting materials for the special meeting?
You may receive more than one set of voting materials for the special meeting, including multiple copies of this proxy
statement/prospectus and multiple proxy cards or voting instruction cards. Please complete, sign, date and return each proxy card and voting instruction card that you receive. For example, if you hold your shares in more than one brokerage account,
you will receive a separate voting instruction card for each brokerage account in which you hold shares. If you are a holder of record and your shares are registered in more than one name, you will receive more than one proxy card.
Who pays for this solicitation?
The expense of filing, printing and mailing this proxy statement/prospectus and the accompanying material will be shared equally by Zoran and CSR. In addition, Zoran has engaged MacKenzie Partners, Inc.
to assist in the solicitation of proxies for the special meeting for a fee not to exceed $100,000, along with customary charges for shareholder contact and reimbursement of reasonable out-of-pocket expenses. Zoran will bear the costs related to the
solicitation of proxies in connection with the special meeting.
Questions about Risks and How to
Get More Information
Are there any risks related to owning CSR ADSs?
Yes. You should carefully review the sections entitled Risk Factors, Description of CSR Ordinary Shares,
Description of CSR American Depositary Shares and Comparison of Rights of Zoran Stockholders and CSR Shareholders.
Where can I find more information about the companies?
You can find more information about CSR and Zoran in the documents described under Where You Can Find More Information and Incorporation by Reference beginning on pages 208 and
209, respectively.
Who can help answer my questions?
If you have any questions about the merger or if you need additional copies of this proxy statement/prospectus or the enclosed proxy, you should contact Zorans proxy solicitor or investor relations
department:
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MacKenzie Partners, Inc.
105 Madison Avenue
New York, New York 10016
Toll Free: (800) 322-2885
(212) 929-5500 (call collect)
proxy@mackenziepartners.com
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or
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Zoran Corporation
Investor
Relations
1390 Kifer Road
Sunnyvale,
California 94086
Phone: (408) 523-6500
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SUMMARY
This summary highlights selected information from this proxy statement/prospectus. It does not contain all of the information that is
important to you. You should carefully read the entire proxy statement/prospectus and the additional documents referred to in this proxy statement/prospectus to fully understand the merger. See also Where You Can Find More Information
and Incorporation by Reference below.
Information About the Companies (see page 145)
CSR plc
Churchill House
Cambridge Business Park
Cowley Road
Cambridge CB4 0WZ
United Kingdom
Tel: +44(0) 1223 692000
CSR is a leading provider of multifunction connectivity, audio and location platforms. CSRs technology portfolio includes Bluetooth, GPS and GNSS, FM Radio, Wi-Fi, Audio and NFC. CSRs
customers include industry leaders in consumer electronics, mobile handsets and automotive.
CSR is headquartered in
Cambridge, the United Kingdom, and has offices in Europe, Asia and North America. As at December 31, 2010, CSR employed 1,554 people in eleven countries.
CSR ordinary shares, nominal value £0.001 per share, are listed on the London Stock Exchange under the symbol CSR.L. CSR has applied to list the CSR ADSs on The NASDAQ Stock Market
under the symbol CSRE.
Zoran Corporation
1390 Kifer Road
Sunnyvale, California 94086
Phone: (408) 523-6500
Zoran is a leading provider of solutions for the digital entertainment and digital imaging markets. Zoran has pioneered high-performance digital audio and video, imaging applications, and Connect Share
Entertain technologies for the digital home.
Zoran provides integrated circuits, software and platforms for digital cameras,
DTVs, set-top boxes, broadband receivers (silicon tuners), DVDs and high definition media players, digital printers, scanners and related MFP. Zoran sells its products to original equipment manufacturers that incorporate them into
products for consumer and commercial applications. Zoran also licenses certain software and other intellectual property.
On
November 30, 2010, Zoran completed the acquisition of Microtune for a transaction equity value of approximately $162 million. Microtune is a pioneer in the development and deployment of silicon tuners, a technology that is complementary and
synergistic to Zoran strategic objectives in both the set-top box and DTV markets.
Zoran is headquartered in Sunnyvale,
California, with operations in Europe, Asia and Israel. As of December 31, 2010, it employed 1,532 people.
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Zoran was incorporated in California in December 1981 and reincorporated in Delaware in
November 1986. Zorans website can be found at www.zoran.com. Information contained on Zorans website is not incorporated by reference unless specifically referenced herein.
Shares of Zoran common stock, par value $0.001 per share, are listed on The NASDAQ Global Select Market under the symbol
ZRAN.
Zeiss Merger Sub, Inc.
Zeiss Merger Sub, Inc. was formed on behalf and at the direction of CSR. It was incorporated in the State of Delaware on February 17, 2011 solely to participate in the merger and has never conducted
any other business.
The Merger (see page 58)
On June 16, 2011, Zoran and CSR entered into a definitive amended and restated merger agreement. Under the merger agreement, which is
subject to a number of conditions, including the approval of both Zoran stockholders and CSR shareholders, the expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, or the Hart-Scott-Rodino
Act, and the satisfaction of other conditions, Zeiss Merger Sub, Inc., CSRs wholly-owned subsidiary, will merge with and into Zoran, resulting in Zoran becoming a wholly-owned subsidiary of CSR. The waiting period under the Hart-Scott Rodino
Act with respect to the merger was terminated on March 24, 2011.
Merger Consideration (see page 108)
If the merger is completed, Zoran stockholders will receive a combination of $6.26 in cash in United States dollars,
without interest, plus 0.14725 of a CSR ADS (which is equivalent to 0.589 CSR ordinary shares) for each share of Zoran common stock they own (other than shares held by Zoran, Parent or any of their respective wholly-owned subsidiaries, or shares for
which appraisal rights are properly exercised) as of immediately prior to the effective time of the merger.
Risk
Factors (see page 29)
In evaluating the merger agreement and the issuance of CSR ADSs in connection with the merger,
you should carefully read this proxy statement/prospectus and especially consider the factors discussed in the section entitled Risk Factors.
Recommendation of Zorans Board of Directors (see page 73)
Zorans board of directors has determined that the merger agreement and the merger are in the best interests of Zoran and its stockholders and has approved and declared advisable the merger and the
merger agreement. Zorans board of directors recommends that Zoran stockholders vote
FOR
adoption of the merger agreement at the special meeting.
The Zoran Special Meeting (see page 54)
The Zoran special meeting of stockholders is scheduled to take place at Zorans principal executive offices located at 1390 Kifer
Road, Sunnyvale, California, on August 30, 2011, at 10:00 a.m. local time. At the special meeting, Zoran stockholders will be asked to vote on the adoption of the merger agreement.
Record Date for Voting and Voting Power (see page 54)
You can vote at the special meeting of Zoran stockholders if you owned shares of Zoran common stock at the close of business on July 18, 2011, the record date for the special meeting of Zoran
stockholders.
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Only Zoran stockholders as of the close of business on July 18, 2011, which is the
record date for the special meeting, will be entitled to receive notice of and to vote at the special meeting and any adjournments or postponements thereof. Each share of Zoran common stock held as of the record date is entitled to one vote at the
special meeting.
Vote Required of Zoran Stockholders (see page 54)
The adoption of the merger agreement requires the affirmative vote of the holders of a majority of the outstanding shares of Zoran common
stock entitled to vote thereon. As of the record date for the special meeting of Zoran stockholders, Zoran had 50,109,237 shares of common stock outstanding.
The Voting Agreements (see page 126)
On
June 16, 2011, certain directors and executive officers of Zoran entered into voting agreements with CSR. As of June 16, 2011, the Zoran directors and officers that entered into voting agreements beneficially owned shares representing less than 1%
of all outstanding shares of Zoran common stock.
On June 16, 2011, certain directors and executive officers of CSR entered
into voting agreements with Zoran. As of June 16, 2011, the CSR directors and officers that entered into voting agreements beneficially owned shares representing approximately 1.5% of all outstanding shares of CSR common stock.
CSR Shareholder Meeting (see page 117)
The merger requires approval by a simple majority in number of those CSR shareholders present and voting (either in person or by proxy) at a meeting of CSR shareholders, unless a poll is validly demanded.
If a poll is demanded, the merger will require the approval of holders of a simple majority of shares voting. See Comparison of Rights of Zoran Stockholders and CSR ShareholdersCurrent Rights of CSR ShareholdersVoting Rights.
As of June 20, 2011, the directors of CSR and their affiliates held ordinary shares representing approximately 1.5% of the entire issued share capital of CSR.
Opinion of Zorans Financial Advisor (see page 78)
Goldman, Sachs & Co. delivered its opinion to Zorans board of directors that, as of June 16, 2011, and based upon and subject to the factors and assumptions set forth in its opinion, the
$6.26 in cash and the 0.14725 of a CSR ADS (which is equivalent to 0.589 CSR ordinary shares) to be paid by CSR for each share of Zoran common stock pursuant to the merger agreement was fair from a financial point of view to the holders (other than
CSR and its affiliates) of the outstanding shares of Zoran common stock.
The full text of the written opinion of Goldman
Sachs, dated June 16, 2011, which sets forth assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with the opinion, is attached to this proxy statement/prospectus as Appendix B.
Goldman Sachs provided its opinion for the information and assistance of Zorans board of directors in connection with its consideration of the transaction. The Goldman Sachs opinion is not a recommendation as to how any holder of Zoran common
stock should vote with respect to the transaction or any other matter. Pursuant to an engagement letter between Zoran and Goldman Sachs, Zoran has agreed to pay Goldman Sachs a transaction fee of approximately $6.3 million, approximately $750,000 of
which is offset by fees paid or payable to Goldman Sachs for proxy advisory services and the remainder of which is payable upon consummation of the transaction.
Interests of Directors and Officers of Zoran in the Merger (see page 92)
In connection with the merger, certain outside directors of Zoran will receive accelerated option vesting and Zorans executive officers may become eligible to receive certain benefits under
Zorans Executive Retention
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and Severance Plan. When considering the recommendation of Zorans board of directors that you vote to adopt the merger agreement, you should be aware that the directors and executive
officers of Zoran have interests in the merger that may be different from or in addition to the interest they share with you as a holder of Zoran common stock generally.
Board of Directors and Management of CSR Following the Consummation of the Merger (see page 97)
Upon the consummation of the merger, CSRs board of directors will be expanded by the appointment of Dr. Levy Gerzberg, as a
non-executive director. The CSR Board will continue to be chaired by Ron Mackintosh, and the Combined Company will be headed by CSRs CEO Joep van Beurden. Will Gardiner will continue as CFO. Information about the current CSR directors and
executive officers can be found in the documents listed under the heading CSR SEC Filings in the section entitled Incorporation By Reference on page 209.
Conditions to the Closing of the Merger (see page 120)
CSR and Zoran will not close the merger unless a number of conditions are satisfied. These include, among other things:
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CSR shareholders have approved the merger and Zoran stockholders have adopted the merger agreement;
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the registration statement on Form F-4 containing this prospectus has been declared effective under the Securities Act and the SEC has not taken any
action to suspend its effectiveness;
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the U.K. Listing Authority and The NASDAQ Stock Market have approved the listing of any newly issued CSR ordinary shares and CSR ADSs, respectively,
issued in connection with the merger;
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required approvals from the Israeli Office of the Chief Scientist and Israeli Investment Center have not been revoked or rescinded;
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the waiting period under the Hart-Scott-Rodino Act has expired or been terminated; and
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no order, injunction or other restraint has been issued by any governmental authority or a competent court that prohibits the consummation of the
merger or that relates to the merger and would be reasonably expected to have a material adverse effect on CSR or Zoran after giving effect to the merger.
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The waiting period under the Hart-Scott-Rodino Act with respect to the merger was terminated on March 24, 2011. The approval of the Israeli Office of the Chief Scientist was granted on March 9,
2011, and the waiver from the Israeli Investment Center was obtained on March 28, 2011.
Termination Events
(see page 123)
The merger agreement may be terminated at any time prior to the consummation of the merger by mutual
written consent of CSR and Zoran, and either party may terminate the merger agreement if:
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the merger has not been completed by December 31, 2011, unless this date is extended in accordance with the terms of the merger agreement; or
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either the Zoran stockholders or the CSR shareholders vote not to adopt the merger agreement or approve the merger, respectively.
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In addition, CSR and Zoran have the right to terminate the merger agreement in certain
other instances, including, among other things:
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if the other partys board of directors (i) withdraws, modifies, qualifies or amends its recommendation of the proposed merger in a manner
adverse to the terminating party; (ii) approves, endorses or recommends any other acquisition offer; (iii) fails to recommend against such an offer; or (iv) publicly announces an intention to do any of (i), (ii) or (iii);
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if the other party breaches any of its covenants in respect of the non-solicitation of third party acquisition proposals in any material respect;
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upon the occurrence of a material adverse effect, as defined in the merger agreement, with respect to the other party;
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if the other party breaches any of its representations, warranties, covenants or agreements contained in the merger agreement in a manner that would
prevent the conditions to closing in respect of the accuracy of the representations and compliance with covenants being satisfied and fails to remedy such breach; or
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if the party receives an alternative takeover proposal, and its board of directors determines (1) that such proposal is more favorable, from a
financial point of view, to its stockholders, and (2) that a failure to terminate the merger agreement in order to enter into a contract in respect of such proposal would be inconsistent with the fiduciary and other duties of its directors
(and, in the case of a takeover proposal in respect of CSR, where the consummation of such proposal is conditioned upon the termination by CSR of the merger agreement).
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Termination Fees (see page 124)
CSR and
Zoran have each agreed to pay to the other party a termination fee in the following circumstances:
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if, after a takeover proposal with respect to one of the parties is announced or proposed to such partys shareholders, the merger agreement is
terminated (by either party) for failure of such partys shareholders to approve the merger and, within 6 months following such termination, in respect of a payment by Zoran, Zoran or, in respect of a payment by CSR, CSR enters into or
consummates any takeover proposal;
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if either party terminates the merger agreement because the other partys board of directors (i) withdraws, modifies, qualifies or amends its
recommendation of the merger in a manner adverse to the terminating party; (ii) approves, endorses or recommends any other acquisition offer; (iii) fails to recommend against such an offer; or (iv) publicly announces an intention to
do any of (i), (ii) or (iii), unless at such time the other party has the right to terminate the merger agreement due to an unremedied breach of the merger agreement that would prevent the conditions to closing in respect of the accuracy of the
representations and compliance with covenants being satisfied; or
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if the other party terminates the merger agreement because CSR or Zoran, as the case may be, breaches any of its covenants in respect of the
non-solicitation of third party acquisition proposals in any material respect.
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Zoran will pay CSR a termination fee if it
terminates the merger agreement to accept a superior proposal, as described under Termination of the Merger Agreement above. CSR will pay Zoran a termination fee if it terminates the merger agreement to accept a superior proposal which
proposal is conditioned upon CSR terminating the merger agreement with Zoran, as described under Termination of the Merger Agreement above.
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The termination fees payable by Zoran and CSR are equal to $8.6 million (subject to a
possible adjustment for value added tax), provided that, if Zoran terminates the merger agreement to accept a superior proposal, the termination fee payable by Zoran will be $12.7 million (subject to a possible adjustment for value added tax).
Appraisal Rights (see page 104)
Section 262 of the DGCL provides holders of Zoran common stock with the ability to dissent from the transaction and seek appraisal of
their shares. A holder of Zoran common stock who properly seeks appraisal and complies with the applicable requirements under the DGCL, which we refer to herein as a dissenting stockholder, will forego the merger consideration and
instead receive a cash payment equal to the fair value of its shares of Zoran common stock in connection with the merger. Fair value will be determined by a court following an appraisal proceeding. Dissenting stockholders will not know the appraised
fair value at the time such holders must elect whether to seek appraisal. The ultimate amount dissenting stockholders receive in an appraisal proceeding may be more or less than, or the same as, the amount such holders would have received under the
merger agreement. A detailed description of the appraisal rights available to holders of Zoran common stock and procedures required to exercise statutory appraisal rights is included in the section entitled The MergerAppraisal
Rights beginning on page 104.
To seek appraisal, you must deliver a written demand for appraisal to Zoran before the
vote on the adoption of the merger agreement at the Zoran special meeting, and you must not vote in favor of the adoption of the merger agreement. Failure to follow exactly the procedures specified under the DGCL will result in the loss of appraisal
rights. For a further description of the appraisal rights available to Zoran stockholders and procedures required to exercise appraisal rights, see the section entitled The MergerAppraisal Rights beginning on page 104.
Due to the complexity of the procedures described above, Zoran stockholders who are considering exercising such rights are
encouraged to seek the advice of legal counsel. The full text of Section 262 of the DGCL is attached as Appendix E to this proxy statement/prospectus.
Government and Regulatory Filings Relating to the Merger (see page 103)
Under the Hart-Scott-Rodino Act and the rules promulgated under that act by the Federal Trade Commission, or FTC, the merger may not be consummated until notifications have been given and information
furnished to the FTC and to the Antitrust Division of the Department of Justice and the specified waiting period has been terminated or has expired. The waiting period under the Hart-Scott Rodino Act with respect to the merger was terminated early
on March 24, 2011. At any time before or after completion of the merger, the FTC or the Antitrust Division could take any action under the antitrust laws as it deems necessary or desirable in the public interest, including seeking to enjoin
completion of the merger or seeking divestiture of substantial assets of Zoran or CSR.
The change in the composition of
Zorans Israeli subsidiarys shareholders in connection with the merger requires under certain circumstances the approval of the Israeli Investment Center, under the Israeli Law for the Encouragement of Capital Investment, 5719-1959, as
amended, and the Chief Scientist of the Israel Ministry of Industry, Trade and Labor under the Israeli Law for Encouragement of Research and Development in the Industry Law, 5744-1984, as amended. The approvals of the Israeli Investment Center and
Israeli Office of the Chief Scientist in connection with the merger are conditions to consummation of the merger, and such approvals were already obtained or waived. Zoran obtained written approval from the Israeli Office of the Chief Scientist on
March 9, 2011 and written waiver from the Israeli Investment Center on March 28, 2011.
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Except as noted above, and the filing of a certificate of merger in Delaware at or
before the effective time of the merger, neither CSR nor Zoran is aware of any material federal, state or foreign regulatory requirements or approvals required for the execution of the merger agreement or consummation of the merger.
Comparison of Rights of Zoran Stockholders and CSR Shareholders (see page 179)
As a result of the merger, Zoran stockholders will receive a portion of the merger consideration in CSR ADSs. Each CSR ADS represents four
CSR ordinary shares. There are numerous differences between the rights of a stockholder of Zoran, a Delaware corporation, and the rights of a shareholder of CSR, a company organized under the laws of England and Wales and, accordingly, the rights of
a holder of CSR ADSs. For example:
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CSR ordinary shares are not listed currently or admitted to trading on any U.S. national securities exchange, but instead are listed and trade on the
London Stock Exchange; however CSR has applied to list the CSR ADSs on The NASDAQ Stock Market under the symbol CSRE;
|
|
|
|
persons acquiring 3% or more of the voting power of CSR are required to notify CSR of such interest;
|
|
|
|
CSRs board of directors is strictly limited in its ability to resist any proposed offer for CSR ordinary shares;
|
|
|
|
except in limited circumstances, CSR shareholders are not entitled to appraisal rights in mergers or any other types of acquisition transactions;
|
|
|
|
holders representing 10% or more of the voting power of CSR are permitted to request the calling of a shareholder meeting and demand that a resolution
be proposed at that shareholder meeting;
|
|
|
|
any person or group that acquires 30% or more of CSR ordinary shares is required to make an offer to acquire all CSR ordinary shares;
|
|
|
|
amendments to the memorandum and articles of association of CSR require the approval of at least 75% of the votes cast at a shareholders meeting; and
|
|
|
|
CSR shareholders are permitted to initiate lawsuits on behalf of the company only in limited circumstances.
|
You should also be aware that it may be difficult to effect service of process to initiate a lawsuit in a U.S. court against directors
and officers of CSR who are not residents of the United States.
Listing of CSR ADSs on The NASDAQ Stock Market
(see page 120)
The merger agreement provides that CSR will use its commercially reasonable efforts to cause the CSR
ADSs to be issued in the merger to be approved for listing on The NASDAQ Stock Market at or prior to the effective time of the merger, subject to official notice of issuance. CSR has applied to list the CSR ADSs on The NASDAQ Stock Market under the
symbol CSRE.
Zorans Agreement Not to Solicit Other Offers (see page 115)
Zoran has agreed that it will not, directly or indirectly: (i) solicit, initiate, knowingly facilitate or knowingly encourage any
inquiries, offers or proposals relating to a proposal to acquire Zoran; or (ii) enter into any contract relating to a proposal to acquire Zoran (other than a permitted confidentiality agreement). However, the merger agreement does not prohibit
Zorans board of directors from considering a bona fide unsolicited takeover proposal.
-16-
CSRs Agreement Not to Solicit Other Offers (see page 116)
CSR has agreed that it will not, directly or indirectly: (i) solicit, initiate, knowingly facilitate or knowingly
encourage any inquiries, offers or proposals relating to a takeover proposal for CSR; or (ii) enter into any contract relating to a takeover proposal for CSR (other than a permitted confidentiality agreement). However, the merger agreement does
not prohibit CSRs board of directors from considering a bona fide unsolicited takeover proposal.
Accounting Treatment (see page 107)
CSR prepares its financial statements in accordance with International Financial Reporting Standards, or IFRS, as issued by the International Accounting Standards Board, or IASB. CSR will account for the
merger as an acquisition under IFRS No. 3 (2008),
Business Combinations
.
Material U.S. Federal
Income Tax Consequences of the Merger (see page 151)
The following statements are only a summary of the anticipated
material U.S. federal income tax consequences of the merger and the ownership of CSR ADSs to U.S. holders of Zoran common stock. It is expected that the merger will be a fully taxable transaction for U.S. federal income tax purposes. As a result, a
U.S. holder of Zoran common stock generally will recognize taxable gain or loss in the merger equal to the difference between (a) the amount of cash plus the fair market value (determined at the effective time of the merger) of the CSR ADSs received
by such holder in the merger, and (b) such holders adjusted tax basis in the Zoran common stock surrendered in the merger.
The tax consequences of the merger to you will depend on your own situation. In addition, you may be subject to state, local or foreign tax laws that are not addressed in this proxy statement/prospectus.
You are urged to consult with your own tax advisor for a full understanding of the tax consequences of the merger to you.
Material U.K. Tax Consequences of Owning CSR ADSs (see page 159)
The following statements are only a summary of
the material U.K. tax consequences of owning CSR ADSs and are based on the same assumptions and reservations as are set out in the section entitled Material Tax ConsequencesMaterial U.K. Tax Consequences of Owning CSR ADS. Holders
of CSR ADSs who are not resident or, in the case of individuals, ordinarily resident in the U.K. will not generally be liable to pay any U.K. tax on dividends paid by CSR or be liable to pay any U.K. tax on capital gains realized on any disposal of
their CSR ADSs, in each case as long as the relevant holder of CSR ADSs does not carry on a trade, profession or vocation in the U.K. through a branch, agency or, in the case of a corporate holder of CSR ADSs, permanent establishment in connection
with which its CSR ADSs are held. A charge to U.K. stamp duty reserve tax at 1.5% of the consideration paid will arise on the issue of the CSR ordinary shares to, or to a nominee or agent for, the depositary, as a person whose business is or
includes the issue of depositary receipts. This U.K. stamp duty reserve tax will be borne by CSR and will not reduce the consideration payable to Zoran stockholders in the merger. The lawfulness of this 1.5% charge is currently subject to
challenge before the U.K. courts. No U.K. stamp duty reserve tax will be payable in respect of a subsequent transfer of CSR ADSs and, in practice, no U.K. stamp duty should need to be paid in respect of any such transfer.
You are urged to consult with your own tax advisor for a full understanding of the U.K. tax consequences for you of owning CSR ADSs.
Material Israeli Tax Consequences of the Merger (see page 152)
The following statements are only a summary of the material Israeli tax consequences of the merger. Zoran has requested tax rulings from
the Israeli Tax Authority that would, among other things, exempt Zoran stockholders who meet certain conditions from the application of Israeli tax withholding to payments of
-17-
consideration in the merger to them. Discussions between Zoran and the Israeli Tax Authority regarding the scope of the rulings are ongoing. If and when the tax rulings are finalized, Zoran will
issue a press release and file a Form 8-K or other document with the SEC describing the scope of the exemptions provided by the rulings and detailing which Zoran stockholders are not covered by the exemptions and should instead seek to obtain an
individual exemption. Zoran intends to make available an advisor who will explain the process and information required to seek such an exemption.
As a consequence of the merger, holders of Zoran common stock will be treated as having sold their Zoran common stock in the merger. Because of Zorans operations in Israel, the Israeli Tax Authority
will view the consideration received by holders of Zoran common stock as subject to Israeli taxation. When an Israeli company is sold, regardless of whether the consideration in the sale is cash or stock, its stockholders may be subject to Israeli
taxation at the rate of 20% for individuals and 24% for corporations.
Whether or not a particular stockholder is actually
subject to Israeli capital gains tax in connection with the merger, absent receipt by Zoran of a tax ruling from the Israeli Tax Authority prior to closing of the merger, all Zoran stockholders will be subject to Israeli tax withholding at the rate
of 20% (for individuals) and 24% (for corporations) on the gross consideration received in the merger (unless the stockholder requests and obtains an individual certificate of exemption from the Israeli Tax Authority, as described below), and CSR or
the exchange agent will withhold and deduct from the cash consideration which each Zoran stockholder is entitled to receive pursuant to the merger agreement an amount equal to 20% or 24%, as applicable, of the gross consideration (cash and ADSs)
received in the merger by such stockholder.
Zoran has filed a request for tax rulings from the Israeli Tax Authority with
respect to (i) the application of Israeli tax withholding to payments of consideration in the merger to Zoran stockholders and (ii) the application of Israeli tax withholding and other Israeli tax treatment applicable in respect of the merger to
holders of Zoran stock options, RSUs and common stock issued to certain employees. There can be no assurance that such rulings will be granted before the closing of the merger or at all.
It is expected that in no event will any holder of Zorans common stock who (i) is an Israeli resident for purposes of the Israeli
Income Tax Ordinance (New Version), 1961, as amended (the ITO) and does not hold its Zoran common stock through an Israeli broker or Israeli financial institution, (ii) acquired its shares of Zoran common stock before Zorans
initial public offering on The NASDAQ Stock Market in 1995 (with respect to such shares), or (iii) holds five percent or more of Zorans outstanding stock as of the closing date of the merger, be covered by the ruling being requested by Zoran,
and, absent receipt of an individual exemption from the Israeli Tax Authority, such a holder will be subject to Israeli tax withholding at the rate of 20% (for individuals) and 24% (for corporations) on the gross consideration received in the
merger, and CSR or the exchange agent will withhold and deduct such amounts in the manner described above. Certain additional categories of non-Israeli resident stockholders are also expected to be excluded from the scope of any eventual ruling
granted by the Israeli Tax Authority, and the final determination of the type of holders of Zoran common stock who will be included in such categories will be based on the outcome of the ongoing discussions with the Israeli Tax Authority.
Exemptions from Israeli tax withholding may also be available to certain holders of Zoran common stock under relevant tax
treaties with Israel or under certain provisions of Israeli tax law. As noted above, regardless of whether Zoran obtains the requested tax rulings from the Israeli Tax Authority, any holder of Zoran common stock who believes that it is entitled to
such an exemption may separately apply to the Israeli Tax Authority to obtain a certificate of exemption from withholding or an individual tax ruling providing for no withholding or withholding at a reduced rate, and submit such certificate of
exemption or ruling to the exchange agent at least three business days prior to the date of the applicable payment of the merger consideration to such holder. If CSR
-18-
or the exchange agent receive a valid exemption certificate or tax ruling (as determined in CSRs or the exchange agents discretion) at least three business days prior to the date of
the applicable payment, then the withholding (if any) of any amounts under the ITO, from the consideration payable shall be made only in accordance with the provisions of such Israeli tax certificate or tax ruling.
You are urged to consult with your own tax advisor for a full understanding of the tax consequences of the merger to you, including
the consequences under any applicable, state, local, foreign or other tax laws
.
For a more detailed description of the material Israeli
tax consequences of the merger, see the section entitled Material Tax ConsequencesMaterial Israeli Tax Consequences of the Merger.
-19-
SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION OF
CSR
The following tables set forth selected historical consolidated financial data for CSR as of and for the fiscal
periods ended December 31, 2010, January 1, 2010, January 2, 2009, December 28, 2007, and December 29, 2006, which have been derived from the respective historical audited consolidated financial statements of
CSR. The selected historical consolidated financial data as of December 31, 2010 and January 1, 2010 and for the fiscal periods ended December 31, 2010, January 1, 2010, and January 2, 2009 are derived from the audited
consolidated financial statements of CSR which are incorporated by reference into this proxy statement/prospectus. The selected historical consolidated financial data for the years ended December 28, 2007 and December 29, 2006 and as of
January 2, 2009, December 28, 2007, and December 29, 2006 has been derived from audited financial statements not included or incorporated by reference herein.
The consolidated financial statements of CSR have been prepared in accordance with IFRS.
This information is only a summary, and you should read it in conjunction with the historical consolidated financial statements of CSR
and the related notes contained in the annual reports and the other information (including but not limited to the business and financial review section) that CSR has previously filed with or furnished to the SEC and which is incorporated
in this proxy statement/prospectus by reference. See Where You Can Find More Information and Incorporation by Reference on pages 208 and 209, respectively.
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period Ended
|
|
|
|
December
31,
2010
(1)(2)(4)
|
|
|
January
1,
2010
(2)(4)
|
|
|
January
2,
2009
(4)(5)
|
|
|
December
28,
2007
(3)(4)
|
|
|
December 29,
2006
|
|
|
|
(U.S. $ in thousands, except per share data)
|
|
Consolidated Income Statement Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
800,608
|
|
|
|
601,399
|
|
|
|
694,865
|
|
|
|
848,622
|
|
|
|
704,695
|
|
Gross profit
|
|
|
376,578
|
|
|
|
268,300
|
|
|
|
309,828
|
|
|
|
396,274
|
|
|
|
328,659
|
|
(Loss)/profit before tax
|
|
|
(5,705
|
)
|
|
|
(14,242
|
)
|
|
|
(6,451
|
)
|
|
|
155,599
|
|
|
|
154,397
|
|
Profit/(loss) for the period
|
|
|
16,626
|
|
|
|
(11,309
|
)
|
|
|
(6,939
|
)
|
|
|
112,804
|
|
|
|
111,197
|
|
Earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings/(loss) per share
|
|
|
0.09
|
|
|
|
(0.07
|
)
|
|
|
(0.05
|
)
|
|
|
0.86
|
|
|
|
0.86
|
|
Diluted earnings/(loss) per share
|
|
|
0.09
|
|
|
|
(0.07
|
)
|
|
|
(0.05
|
)
|
|
|
0.83
|
|
|
|
0.82
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
Shares used to compute basic earnings
(loss ) per share (in millions)
|
|
|
178
|
|
|
|
154
|
|
|
|
129
|
|
|
|
131
|
|
|
|
130
|
|
Shares used to compute diluted earnings
(loss) per share (in millions)
|
|
|
181
|
|
|
|
154
|
|
|
|
129
|
|
|
|
136
|
|
|
|
136
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
|
December 31,
2010
|
|
|
January 1,
2010
|
|
|
January 2,
2009
|
|
|
December 28,
2007
|
|
|
December 29,
2006
|
|
|
|
(U.S. $ in thousands, except share data)
|
|
Consolidated Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
172,315
|
|
|
|
170,601
|
|
|
|
180,898
|
|
|
|
193,311
|
|
|
|
117,494
|
|
Net current assets
|
|
|
505,312
|
|
|
|
465,510
|
|
|
|
307,810
|
|
|
|
267,717
|
|
|
|
269,000
|
|
Net assets
|
|
|
774,564
|
|
|
|
774,111
|
|
|
|
466,746
|
|
|
|
508,663
|
|
|
|
406,209
|
|
Total assets
|
|
|
958,130
|
|
|
|
903,203
|
|
|
|
591,681
|
|
|
|
669,830
|
|
|
|
500,750
|
|
Total equity
|
|
|
774,564
|
|
|
|
774,111
|
|
|
|
466,746
|
|
|
|
508,663
|
|
|
|
406,209
|
|
Other Information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of shares issued at fiscal year end (in millions)
|
|
|
185.0
|
|
|
|
182.2
|
|
|
|
132.9
|
|
|
|
132.1
|
|
|
|
130.2
|
|
(1)
|
Includes a $59.8 million charge arising in the fourth quarter from the settlement with Broadcom Corporation relating to litigation acquired with SiRF Technology
Holdings Inc.
|
-20-
(2)
|
Results reflect the acquisition of SiRF Technology Holdings, Inc. from June 26, 2009.
|
(3)
|
Includes a $15.0 million charge arising in the second quarter from settlement of a patent infringement suit with Washington Research Foundation (WRF).
|
(4)
|
Results reflect the acquisition of Cambridge Positioning Systems Limited and NordNav Technologies AB from January 12, 2007.
|
(5)
|
Includes impairment of goodwill relating to the UbiNetics (VPT) Limited acquisition of $36.9 million and impairment of certain assets which were not used in future
development activities of $16.0 million.
|
-21-
SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION OF
ZORAN
The following tables set forth selected historical consolidated financial data for Zoran as of and for the
three-month periods ended March 31, 2011 and March 31, 2010 and as of and for the years ended December 31, 2010, 2009, 2008, 2007 and 2006. The selected historical consolidated financial data of Zoran as of March 31, 2011 and for the
three-month periods ended March 31, 2011 and 2010 have been derived from Zorans historical unaudited condensed consolidated financial statements contained in its Quarterly Report on Form 10-Q for the quarter ended March 31, 2011, which is
incorporated by reference into this proxy statement/prospectus. The selected historical consolidated financial data as of December 31, 2010 and 2009 and for the years ended December 31, 2010, 2009 and 2008 are derived from the audited
consolidated financial statements of Zoran which are incorporated by reference into this proxy statement/prospectus. The selected historical consolidated financial data for the years ended December 31, 2007 and 2006 and as of December 31,
2008, 2007 and 2006 have been derived from financial statements not included or incorporated by reference herein.
The
consolidated financial statements of Zoran have been prepared in accordance with United States generally accepted accounting principles.
This information is only a summary, and you should read it in conjunction with the historical consolidated financial statements of Zoran and the related notes contained in the annual reports and the other
information that Zoran has previously filed including but not limited to the Managements Discussion and Analysis of Financial Condition and Results of Operations section, with the SEC and which is incorporated in this proxy
statement/prospectus by reference. See Where You Can Find More Information and Incorporation by Reference on pages 208 and 209, respectively.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Year Ended
|
|
|
|
March 31,
2011
|
|
|
March 31,
2010
|
|
|
December 31,
2010
|
|
|
December 31,
2009
|
|
|
December 31,
2008
|
|
|
December 31,
2007
|
|
|
December 31,
2006
|
|
|
|
(U.S.$ in thousands, except share and per share amounts)
|
|
Consolidated Statements of Operations Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue
|
|
|
84,920
|
|
|
|
90,451
|
|
|
|
357,342
|
|
|
|
380,081
|
|
|
|
438,539
|
|
|
|
507,361
|
|
|
|
495,805
|
|
Gross profit
(1)
|
|
|
43,707
|
|
|
|
46,731
|
|
|
|
186,035
|
|
|
|
183,584
|
|
|
|
209,531
|
|
|
|
271,079
|
|
|
|
269,545
|
|
Operating (loss)/income
|
|
|
(30,805
|
)
|
|
|
(3,618
|
)
|
|
|
(40,644
|
)
|
|
|
(36,781
|
)
|
|
|
(216,037
|
)
|
|
|
2,293
|
|
|
|
10,556
|
|
Net (loss)/income
|
|
|
(30,366
|
)
|
|
|
(3,969
|
)
|
|
|
(47,636
|
)
|
|
|
(32,958
|
)
|
|
|
(215,727
|
)
|
|
|
66,186
|
|
|
|
16,328
|
|
Net (loss)/income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
(0.62
|
)
|
|
|
(0.08
|
)
|
|
|
(0.95
|
)
|
|
|
(0.64
|
)
|
|
|
(4.20
|
)
|
|
|
1.32
|
|
|
|
0.34
|
|
Diluted
|
|
|
(0.62
|
)
|
|
|
(0.08
|
)
|
|
|
(0.95
|
)
|
|
|
(0.64
|
)
|
|
|
(4.20
|
)
|
|
|
1.29
|
|
|
|
0.33
|
|
Shares used to compute basic net loss per share (thousands)
|
|
|
49,079
|
|
|
|
51,174
|
|
|
|
50,152
|
|
|
|
51,464
|
|
|
|
51,350
|
|
|
|
49,981
|
|
|
|
48,353
|
|
Shares used to compute diluted net loss per share (thousands)
|
|
|
49,079
|
|
|
|
51,174
|
|
|
|
50,152
|
|
|
|
51,464
|
|
|
|
51,350
|
|
|
|
51,404
|
|
|
|
50,099
|
|
-22-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
|
March 31,
2011
|
|
|
December 31,
2010
|
|
|
December 31,
2009
|
|
|
December 31,
2008
|
|
|
December 31,
2007
|
|
|
December 31,
2006
|
|
|
|
(U.S.$ in thousands)
|
|
Consolidated Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents and short term investments
|
|
|
251,479
|
|
|
|
261,266
|
|
|
|
398,686
|
|
|
|
358,527
|
|
|
|
319,809
|
|
|
|
296,229
|
|
Working capital
(2)
|
|
|
264,166
|
|
|
|
287,205
|
|
|
|
408,573
|
|
|
|
378,234
|
|
|
|
340,406
|
|
|
|
314,790
|
|
Total assets
|
|
|
490,593
|
|
|
|
507,389
|
|
|
|
552,456
|
|
|
|
572,447
|
|
|
|
820,332
|
|
|
|
676,630
|
|
Net assets
|
|
|
375,371
|
|
|
|
401,478
|
|
|
|
460,268
|
|
|
|
479,410
|
|
|
|
687,772
|
|
|
|
583,997
|
|
Other long term liabilities
|
|
|
38,367
|
|
|
|
38,517
|
|
|
|
32,397
|
|
|
|
26,985
|
|
|
|
20,756
|
|
|
|
12,784
|
|
Accumulated deficit
|
|
|
(487,558
|
)
|
|
|
(457,192
|
)
|
|
|
(409,556
|
)
|
|
|
(376,598
|
)
|
|
|
(160,871
|
)
|
|
|
(227,510
|
)
|
Total stockholders equity
|
|
|
375,371
|
|
|
|
401,478
|
|
|
|
460,268
|
|
|
|
479,410
|
|
|
|
687,772
|
|
|
|
583,997
|
|
(1)
|
Computed using total revenues less cost of hardware product revenues.
|
(2)
|
Computed by taking current assets less current liabilities.
|
As discussed in The MergerBackground of the Merger beginning at page 58, several developments have impacted the business outlook of Zoran, including the earthquake and tsunami in Japan
and the recent announcement by Cisco Systems that it will exit its Flip consumer video camcorder segment.
Zoran reviews its
goodwill and intangible assets for impairment, no less often than annually, when changes in circumstances indicate the carrying value may not be recoverable. The annual impairment test is conducted as of September 30 of each year. A change in
circumstances may be indicated, and the carrying value of its goodwill or intangible assets may be impaired, when there are declines in its stock price and market capitalization, declines in expected future cash flows, or slower growth rates in its
industry. In addition, Zoran assesses on a quarterly basis the realizability of its deferred tax assets by evaluating all available evidence, both positive and negative. Zoran will continue to evaluate and monitor the impact of the decline in its
forecast as discussed in The MergerBackground of the Merger beginning at page 58 and may be required to record a significant charge to earnings for the period in which any impairment of its goodwill or intangible assets is
determined or in which an increase in its valuation allowance for deferred tax assets is determined to be needed, which could adversely affect its results of operations.
-23-
SELECTED UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL INFORMATION
The following summary unaudited pro forma condensed consolidated financial information is intended
to illustrate the effect of the proposed merger of CSR and Zoran and the acquisition of Microtune by Zoran, assuming that these transactions has occurred in the past. CSR will account for the merger as an acquisition under IFRS No. 3 (2008),
Business Combinations
.
The information in the table below is extracted from the unaudited pro forma condensed
consolidated balance sheet of CSR as of December 31, 2010 and the unaudited pro forma condensed consolidated income statement of CSR for the 52 weeks ended December 31, 2010. The unaudited pro forma condensed consolidated balance sheet as
of December 31, 2010 has been prepared as though the acquisition of Zoran occurred as of that date. The unaudited pro forma condensed consolidated income statement for the 52 weeks ended December 31, 2010 has been prepared as though the
acquisition of Zoran and Zorans acquisition of Microtune each occurred as of the beginning of such period, namely January 2, 2010. The assumptions underlying the pro forma adjustments are described in the section Unaudited Pro Forma
Financial Information.
The unaudited pro forma consolidated financial information is provided for illustrative purposes
only and does not show what the results of operations and financial position of CSR would have been if the merger and Zorans acquisition of Microtune had actually occurred on the dates assumed. This information also does not indicate what the
future operating results or consolidated financial position of the Combined Company will be.
For more detailed information,
you should read Unaudited Pro Forma Financial Information.
|
|
|
|
|
|
|
Pro forma
|
|
|
|
(U.S. $ in thousands,
except per share
data)
|
|
Pro Forma Consolidated Income Statement Data
|
|
|
|
|
Revenue
|
|
|
1,241,796
|
|
Gross profit
|
|
|
598,125
|
|
Operating loss
|
|
|
60,261
|
|
Loss before tax
|
|
|
51,628
|
|
Loss for the period
|
|
|
36,868
|
|
Basic earnings/(loss) per share
|
|
|
(0.18
|
)
|
Diluted earnings/(loss) per share
|
|
|
(0.18
|
)
|
|
|
Pro Forma Consolidated Balance Sheet Data:
|
|
|
|
|
Cash and cash equivalents, treasury deposits and investments
|
|
|
369,717
|
|
Net assets
|
|
|
912,489
|
|
Total assets
|
|
|
1,210,805
|
|
Total equity
|
|
|
912,489
|
|
-24-
COMPARATIVE MARKET PRICE AND DIVIDEND INFORMATION
Market Prices
The primary trading market for CSR ordinary shares is the London Stock Exchange, where CSR ordinary shares trade under the ticker symbol CSR.L. As of July 20, 2011, there were 170,600,665 CSR
ordinary shares issued and outstanding (excluding those ordinary shares held in treasury). CSR has applied to list the CSR ADSs on The NASDAQ Stock Market under the symbol CSRE.
Zoran common stock trades on The NASDAQ Global Select Market under the ticker symbol ZRAN. As of July 20, 2011, there were
50,115,202 shares of Zoran common stock outstanding.
The following table shows the closing sales price for CSR ordinary
shares from the Daily Official List of the London Stock Exchange in pounds sterling and as converted into U.S. dollars, the closing sales price for Zoran common stock as reported by The NASDAQ Global Select Market, and the market value (in U.S.
dollars) of the merger consideration per share, in each case on (a) February 18, 2011, the last trading day prior to the announcement of the original merger agreement, (b) June 16, 2011, the last trading day prior to the announcement of the amended
and restated merger agreement, and (c) July 20, 2011, the last practicable trading day before the printing of this proxy statement/prospectus:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Closing Sales
Price of
CSR Ordinary
Shares
|
|
|
Closing Sales
Price of Zoran
Common Stock
|
|
|
Zoran
Ordinary Share
Price
Equivalent
Value
|
|
February 18, 2011
|
|
£
|
4.34
|
|
|
$
|
7.05
|
|
|
$
|
9.32
|
|
|
$
|
10.41
|
(1)
|
June 16, 2011
|
|
£
|
3.08
|
|
|
$
|
4.97
|
|
|
$
|
7.20
|
|
|
$
|
9.19
|
(2)
|
July 20, 2011
|
|
£
|
2.90
|
|
|
$
|
4.69
|
|
|
$
|
8.44
|
|
|
$
|
9.02
|
(3)
|
(1)
|
Consists of (a) the $6.26 per share cash portion of the merger consideration plus (b) the closing sales price of CSR ordinary shares on February 18, 2011 of
£4.34, multiplied by 0.589, and converted into dollars at an exchange rate of £1 = $1.6234 (the prevailing exchange rate on such date).
|
(2)
|
Consists of (a) the $6.26 per share cash portion of the merger consideration plus (b) the closing sales price of CSR ordinary shares on June 16, 2011 of £3.08
multiplied by 0.589, and converted into U.S. dollars at an exchange rate of £1 = $1.6147 (the prevailing exchange rate on such date).
|
(3)
|
Consists of (a) the $6.26 per share cash portion of the merger consideration plus (b) the closing sales price of CSR ordinary shares on July 20, 2011 of £2.90
multiplied by 0.589, and converted into U.S. dollars at an exchange rate of £1 = $1.6139 (the prevailing exchange rate on such date).
|
The following table shows the high and low market prices for CSR ordinary shares and Zoran common stock for the five most recent full financial years, for each full financial quarter for the two most
recent full financial years and for each month within the last six months:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CSR Ordinary Shares (pence)
|
|
|
Zoran Common Stock ($)
|
|
Year
|
|
High
|
|
|
Low
|
|
|
High
|
|
|
Low
|
|
2010
|
|
|
505.00
|
|
|
|
280.90
|
|
|
|
12.23
|
|
|
|
6.18
|
|
2009
|
|
|
508.00
|
|
|
|
157.25
|
|
|
|
12.00
|
|
|
|
5.20
|
|
2008
|
|
|
600.00
|
|
|
|
150.25
|
|
|
|
22.48
|
|
|
|
5.53
|
|
2007
|
|
|
905.00
|
|
|
|
548.00
|
|
|
|
26.46
|
|
|
|
13.57
|
|
2006
|
|
|
1,512.00
|
|
|
|
613.00
|
|
|
|
29.13
|
|
|
|
13.67
|
|
-25-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CSR Ordinary Shares (pence)
|
|
|
Zoran Common Stock ($)
|
|
Quarter
|
|
High
|
|
|
Low
|
|
|
High
|
|
|
Low
|
|
Second Quarter 2011
|
|
|
391.40
|
|
|
|
302.00
|
|
|
|
10.80
|
|
|
|
7.20
|
|
First Quarter 2011
|
|
|
447.00
|
|
|
|
351.66
|
|
|
|
11.22
|
|
|
|
8.70
|
|
Fourth Quarter 2010
|
|
|
356.80
|
|
|
|
309.60
|
|
|
|
8.80
|
|
|
|
6.18
|
|
Third Quarter 2010
|
|
|
414.70
|
|
|
|
280.90
|
|
|
|
9.78
|
|
|
|
6.96
|
|
Second Quarter 2010
|
|
|
472.00
|
|
|
|
363.90
|
|
|
|
11.59
|
|
|
|
8.95
|
|
First Quarter 2010
|
|
|
505.00
|
|
|
|
417.40
|
|
|
|
12.23
|
|
|
|
10.56
|
|
Fourth Quarter 2009
|
|
|
485.70
|
|
|
|
368.80
|
|
|
|
11.14
|
|
|
|
8.82
|
|
Third Quarter 2009
|
|
|
508.00
|
|
|
|
347.75
|
|
|
|
12.00
|
|
|
|
10.55
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CSR Ordinary Shares (pence)
|
|
|
Zoran Common Stock (U.S. $)
|
|
Month
|
|
High
|
|
|
Low
|
|
|
High
|
|
|
Low
|
|
June 2011
|
|
|
350.70
|
|
|
|
302.00
|
|
|
|
8.51
|
|
|
|
7.20
|
|
May 2011
|
|
|
391.40
|
|
|
|
355.00
|
|
|
|
10.32
|
|
|
|
7.77
|
|
April 2011
|
|
|
390.18
|
|
|
|
359.10
|
|
|
|
10.80
|
|
|
|
10.13
|
|
March 2011
|
|
|
385.00
|
|
|
|
365.80
|
|
|
|
11.03
|
|
|
|
9.53
|
|
February 2011
|
|
|
447.00
|
|
|
|
380.50
|
|
|
|
11.22
|
|
|
|
9.15
|
|
January 2011
|
|
|
417.10
|
|
|
|
350.30
|
|
|
|
9.83
|
|
|
|
8.70
|
|
The trading price of CSR ordinary shares is denominated in pounds sterling and the pound-dollar exchange
rate fluctuates continuously.
You are urged to obtain current market quotations for CSR ordinary shares and Zoran common stock and to assess pound/dollar exchange rates before making a decision with respect to the merger agreement.
Currencies and Exchange Rates
References in this proxy statement/prospectus to dollars, $ or cents are to the currency of the United
States and references to GBP, pounds sterling, pounds, £, pence or p are to the currency of the United Kingdom. There are 100 pence to each pound.
In this proxy statement/prospectus, unless otherwise stated, pounds sterling have been translated into U.S. dollars at the noon buying
rate in New York City for cable transfers in pounds sterling as certified for custom purposes by the Federal Reserve Bank of New York, on the date indicated. On July 20, 2011, the latest practicable date for which exchange rate information was
available before the printing of this proxy statement/prospectus, the noon buying rate in New York City for cable transfers in pounds sterling as certified for customs purposes by the Federal Reserve Bank of New York was $1.6139 per £1.00 and
the exchange rate reported on the Daily Official List of the London Stock Exchange was $0.6188 per £1.00. These translations should not be construed as a representation that the U.S. dollar amounts actually represent, or could be converted
into, pounds sterling at the rates indicated.
The tables set forth below, for the periods and dates indicated, contain
information concerning the noon buying rates for pounds sterling expressed in U.S. dollars per pound sterling.
High and low
exchange rates of the U.S. dollars per pound sterling for each month during the previous six months:
|
|
|
|
|
|
|
|
|
Month
|
|
High
|
|
|
Low
|
|
June 2011
|
|
|
1.64
|
|
|
|
1.60
|
|
May 2011
|
|
|
1.65
|
|
|
|
1.61
|
|
April 2011
|
|
|
1.67
|
|
|
|
1.61
|
|
March 2011
|
|
|
1.64
|
|
|
|
1.59
|
|
February 2011
|
|
|
1.63
|
|
|
|
1.59
|
|
January 2011
|
|
|
1.60
|
|
|
|
1.55
|
|
-26-
Average exchange rates of the U.S. dollars per pound sterling for
the past five years
:
|
|
|
|
|
Year
|
|
Average
Rate
(1)
|
|
2010
|
|
|
1.55
|
|
2009
|
|
|
1.57
|
|
2008
|
|
|
1.85
|
|
2007
|
|
|
2.00
|
|
2006
|
|
|
1.84
|
|
(1)
|
The average of the noon buying rates on the last day of each month during the period.
|
Dividend Policy
At the CSR annual
general meeting held on May 18, 2011, CSR shareholders approved the CSR board of directors proposal to pay CSRs first dividend of £0.04 ($0.065, based on the exchange rate on June 3, 2011) per share in respect of the 2010
financial year, representing 2/3 of a notional £0.06 ($0.098, based on the exchange rate on June 3, 2011) full year dividend that would have been paid if CSR had commenced payment of dividends sooner. The dividend was paid on June 3, 2011
to CSR shareholders of record on May 13, 2011. CSR shareholders of record on August 19, 2011 will be entitled to receive CSRs next dividend payment. Because the merger will not close on or prior to that date, Zoran stockholders will not
participate in the dividend.
It is the CSR board of directors intention to follow a progressive dividend policy that
reflects the underlying growth prospects of CSR, as well as the long term outlook for growth in earnings per share and group cash flow. The CSR board of directors intends to pay dividends on a semi-annual basis.
Zoran has never paid cash dividends on its capital stock. It is Zorans present policy to retain earnings to finance the growth and
development of its business and, therefore, Zoran does not anticipate paying any cash dividends in the foreseeable future.
-27-
COMPARATIVE PER SHARE INFORMATION
The following table shows per share data regarding book value per share and earnings (loss) per share from continuing operations for
Zoran and CSR on a historical and on a pro forma basis extracted from the data as presented in this proxy statement/prospectus in the section entitled Unaudited Pro Forma Financial Information. The pro forma combined book value per share
information was computed as if the merger had been completed on December 31, 2010. The pro forma earnings per share information was computed as if the acquisition of Zoran and Zorans acquisition of Microtune had been completed on
January 2, 2010. The Zoran pro forma combined equivalent information was calculated by multiplying the corresponding pro forma combined data by the exchange ratio of 0.14725 of a CSR ADS (which is equivalent to 0.589 CSR ordinary shares) for
each share of Zoran common stock held. This information is intended to illustrate how each share of Zoran common stock would have participated in the Combined Companys earnings per share and book value per share if the merger had been
completed on the relevant dates. These amounts are provided for illustrative purposes only and do not necessarily reflect future amounts of earnings per share and book value per share of CSR.
The following comparative per share information is derived from the historical consolidated financial statements of each of Zoran and
CSR. The information below should be read in conjunction with the sections entitled Selected Historical Consolidated Financial Information of CSR beginning on page 20, Selected Historical Consolidated Financial Information of
Zoran beginning on page 22 and Unaudited Pro Forma Condensed Consolidated Financial Information beginning on page 128 of this proxy statement/prospectus. See also Where You Can Find More Information and
Incorporation by Reference on pages 208 and 209, respectively.
Zorans 2010 fiscal year began on
January 1, 2010 and ended on December 31, 2010; and CSRs 2010 fiscal year began on January 2, 2010 and ended on December 31, 2010. For purposes of the following table, book value per share information is as at
December 31, 2010, and earnings per share (basic and diluted) is for the fiscal year ended December 31, 2010.
|
|
|
|
|
|
|
2010
|
|
|
|
($)
|
|
Book Value Per Share
(1
)
|
|
|
|
|
CSR historical
|
|
|
4.36
|
|
Zoran historical
|
|
|
8.20
|
|
Pro forma combined
|
|
|
4.44
|
|
Zoran Pro forma combined equivalent
|
|
|
0.65
|
|
Basic Earnings/(Loss) Per Share
|
|
|
|
|
CSR historical
|
|
|
0.09
|
|
Zoran historical
|
|
|
(0.95
|
)
|
Pro forma combined
|
|
|
(0.18
|
)
|
Zoran Pro forma combined equivalent
|
|
|
(0.03
|
)
|
Diluted Earnings/(Loss) Per Share
|
|
|
|
|
CSR historical
|
|
|
0.09
|
|
Zoran historical
|
|
|
(0.95
|
)
|
Pro forma combined
|
|
|
(0.18
|
)
|
Zoran Pro forma combined equivalent
|
|
|
(0.03
|
)
|
(1)
|
Book Value Per Share is defined as total equity divided by issued shares less treasury shares held as of the balance sheet date.
|
-28-
RISK FACTORS
The merger and the businesses of CSR, Zoran and the Combined Company involve a high degree of risk. By voting in favor of the adoption
of the merger agreement, you will be choosing to invest in CSR ADSs. Investing in CSR ordinary shares or CSR ADSs involves risks, some of which are related to the merger. In considering the proposed merger, you should carefully consider the
following information about these risks, as well as the other information included in or incorporated by reference into this proxy statement/prospectus, including the Annual Report of CSR plc on Form 20-F/A for the fifty-two week period ended
December 31, 2010.
You are also encouraged to read and consider the risk factors specific to Zorans
businesses (that may also affect CSR) described in Zorans annual report on Form 10-K for the year ended December 31, 2010 because, as a result of the merger, they will become risks of the Combined Company.
Please see Where You Can Find More Information and Incorporation by Reference on pages 208 and 209,
respectively, for information on where you can find the periodic reports and other documents CSR and Zoran have filed with or furnished to the SEC and which are incorporated into this proxy statement/prospectus by reference.
Risks Related to the Merger
CSR may experience difficulties in integrating Zorans business with its existing businesses.
The merger involves the integration of two companies that have previously operated independently. The difficulties of combining the companies operations include:
|
|
|
the necessity of coordinating and consolidating organizations, systems and facilities that are geographically distant and in different countries;
|
|
|
|
the task of integrating the management and personnel of CSR and Zoran, maintaining employee morale and retaining and incentivizing key employees; and
|
|
|
|
the technical challenges associated with the combination of Zorans technologies with CSRs own technologies.
|
The process of integrating operations could cause an interruption of, or loss of momentum in, the activities of one or more of the
Combined Companys businesses and the loss of key personnel. The diversion of managements attention and any delays or difficulties encountered in connection with the merger and the integration of the two companies operations could
have an adverse effect on the business, results of operations, financial conditions or prospects of the Combined Company after the merger. Moreover, if management is unable to successfully integrate the operations of the two companies, the
anticipated benefits of the merger may not be realized.
CSR may experience difficulties in integrating
Zoran
s
products and customer base with its own.
The Combined Company
may fail to integrate Zorans technology into CSR products or Zoran products into the CSR customer base, and vice versa, and/or such integration may not occur at the speed or to the extent that CSR and Zoran might anticipate. For example, plans
to integrate Zorans camera technology with CSRs existing products for application in mobile devices or to sell integrated solutions into the automotive sector may prove to be more difficult or take longer than envisaged. The anticipated
benefits of the merger are dependent on the reaction of the markets and the customers of CSR and Zoran and other factors over which the Combined Company has no control. If the Combined Company is unable to successfully integrate the two
companies products and customer bases, the business, results of operations, financial conditions or prospects of the Combined Company could be affected and the anticipated benefits of the merger may not be realized.
-29-
CSR may not achieve the cost synergies and rightsizing savings it anticipates.
The Combined Company may fail to achieve the cost synergies and rightsizing savings that CSR anticipates achieving
from the merger. In particular, the Combined Companys ability to successfully realize cost synergies and rightsizing savings and the timing of this realization may be affected by a variety of factors, including but not limited to:
|
|
|
its broad geographic areas of operations and the resulting potential complexity of integrating CSRs and Zorans operations;
|
|
|
|
the difficulty of implementing its cost savings plans;
|
|
|
|
the technical challenges associated with the combination of Zorans technologies with CSRs own technologies; and
|
|
|
|
unforeseeable events, including major changes in the industries in which CSR and Zoran operate.
|
If the cost synergies and rightsizing savings that CSR expects are not realized or are delayed, the Combined Companys results of
operations and the market price of ordinary shares of CSR and CSR ADSs would be adversely affected.
The merger is being
challenged by stockholder class action lawsuits that have been filed against CSR, Zoran and Zeiss Merger Sub, Inc.
Purported class action lawsuits are frequently filed in response to merger announcements. CSR, Zoran, Zeiss Merger Sub, Inc. and certain
directors of Zoran are currently defending against several lawsuits in Delaware and California related to the proposed merger. See The MergerLegal Proceedings Relating to Merger for further details.
Several plaintiffs law firms have announced investigations of Zoran concerning possible breaches of fiduciary duty and other
violations of law, and it is possible that one or more of these or other law firms could initiate additional litigation against CSR, Zoran, Zeiss Merger Sub, Inc. and certain directors of Zoran. These lawsuits may require CSR, Zoran, Zeiss Merger
Sub, Inc. and certain directors of Zoran to incur substantial legal fees and expenses, could create additional uncertainty relating to the proposed merger and could be distracting to the management of the Combined Company.
Zoran stockholders may be subject to Israeli capital gains tax in connection with the merger and absent receipt of a ruling or
exemption, will generally be subject to Israeli tax withholding on the gross consideration received in the merger.
As
a consequence of the merger, holders of Zoran common stock will be treated as having sold their Zoran common stock in the merger. Because of Zorans operations in Israel, the Israeli Tax Authority will view the consideration received by holders
of Zoran common stock as subject to Israeli taxation. When an Israeli company is sold, regardless of whether the consideration in the sale is cash or stock, its stockholders may be subject to Israeli taxation at the rate of 20% for individuals and
24% for corporations.
Whether or not a particular stockholder is actually subject to Israeli capital gains tax in connection
with the merger, absent receipt by Zoran of a tax ruling from the Israeli Tax Authority prior to closing of the merger, all Zoran stockholders will be subject to Israeli tax withholding at the rate of 20% (for individuals) and 24% (for corporations)
on the gross consideration received in the merger (unless the stockholder requests and obtains an individual certificate of exemption from the Israeli Tax Authority, as described below), and CSR or the exchange agent will withhold and deduct from
the cash consideration which each Zoran stockholder is entitled to receive pursuant to the merger agreement an amount equal to 20% or 24% as applicable, of the gross consideration (cash and ADSs) received in the merger by such stockholder.
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Zoran has filed a request for tax rulings from the Israeli Tax Authority with respect to (i)
the application of Israeli tax withholding to payments of consideration in the merger to stockholders and (ii) the application of Israeli tax withholding and other Israeli tax treatment applicable in respect of the merger to holders of Zoran stock
options, RSUs and common stock issued to certain employees. Zoran is currently in discussion with the Israeli Tax Authority on the scope of the final rulings and the exemption to be provided to Zoran stockholders and as of July 28, 2011, no
definitive binding ruling has been obtained from the Israeli Tax Authority. There can be no assurance that such rulings will be granted before the closing of the merger or at all.
It is expected that in no event will any holder of Zorans common stock who (i) is an Israeli resident for purposes of the Israeli
Income Tax Ordinance (New Version), 1961, as amended (the ITO) and does not hold its Zoran common stock through an Israeli broker or Israeli financial institution, (ii) acquired its shares of Zoran common stock before Zorans
initial public offering on The NASDAQ Stock Market in 1995 (with respect to such shares), or (iii) holds five percent or more of Zorans outstanding stock as of the closing date of the merger, be covered by the ruling being requested by Zoran,
and, absent receipt of an individual exemption from the Israeli Tax Authority, such a holder will be subject to Israeli tax withholding at the rate of 20% (for individuals) and 24% (for corporations) on the gross consideration received in the
merger, and CSR or the exchange agent will withhold and deduct such amounts in the manner described above. Certain additional categories of non-Israeli resident stockholders are also expected to be excluded from the scope of any eventual ruling
granted by the Israeli Tax Authority, and the final determination of the type of holders of Zoran common stock who will be included in such categories will be based on the outcome of the ongoing discussions with the Israeli Tax Authority.
The Israeli tax withholding consequences of the merger to Zoran stockholders and holders of Zoran stock options and RSUs may
vary depending upon the particular circumstances of each stockholder or holder of Zoran stock options or RSUs, as applicable, and the final tax rulings issued by the Israeli Tax Authority. To the extent that tax is withheld on payments to U.S.
taxpayers, it is possible that such withheld taxes may not be able to be credited against such taxpayers U.S. income tax liability.
You are urged to consult with your own tax advisor for a full understanding of the tax consequences of the merger to you, including the consequences under any applicable, state, local, foreign or
other tax laws or tax treaties.
For a more detailed description of the material Israeli tax consequences of the
merger, see the section entitled Material Tax ConsequencesMaterial Israeli Tax Consequences of the Merger.
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The merger may result in a loss of customers or strategic alliances.
As a result of the merger, some of the customers, potential customers or strategic partners of CSR and Zoran may
terminate or scale back their business relationship with the Combined Company. Some customers may not wish to source a larger percentage of their product needs from a single company, or may feel that CSR or Zoran, as appropriate, and thus the
Combined Company is too closely allied with one of their competitors. Potential customers or strategic partners may delay entering into, or decide not to enter into, a business relationship with the Combined Company because of the merger. If
customer relationships or strategic alliances are adversely affected by the merger, the Combined Companys business and financial performance would suffer.
Third parties may terminate or alter existing contracts with Zoran.
Zoran has contracts with suppliers, distributors, customers, licensors, licensees, lessors, insurers and other business partners that have
change of control or similar clauses that allow the counterparty to terminate or change the terms of their contract upon the closing of the transactions contemplated by the merger agreement. CSR and Zoran will seek to obtain consent from
these other parties, but if these third party consents cannot be obtained, or are obtained on unfavorable terms, the Combined Company may lose protection under certain release agreements and patent non-assertion agreements, may lose certain
insurance coverage, may suffer a loss of potential future revenue, may lose confidentiality protection in certain cases and may lose intellectual property that is material to the business of the Combined Company.
The value of the portion of the merger consideration payable by CSR in CSR ADSs may decline.
In addition to $6.26 in cash, Zoran shareholders will be entitled to receive 0.14725 CSR ADSs pursuant to the merger, with each CSR ADS
representing four ordinary shares of CSR, for each Zoran share held. Because the market price of ordinary shares of CSR is denominated in pounds sterling, the CSR ADSs to be issued will be denominated in U.S. dollars and the pounds sterling-U.S.
dollar exchange rate and market price of the ordinary shares of CSR fluctuate continuously, the value of the consideration that Zoran shareholders will receive on consummation of the merger may be less than (or greater than) that stated as of the
last trading day before the merger agreement was executed or on the date of this proxy statement/prospectus.
The merger
may be consummated even if CSR or Zoran has experienced a material adverse change.
In general, under the merger
agreement, either party can refuse to consummate the merger if there is a material adverse change affecting the other party between December 31, 2010 and the consummation of the merger. Some adverse changes, events, circumstances or developments
will not prevent the merger from going forward, however, even if they would have a material adverse effect on CSR or Zoran, including adverse changes, events, circumstances or developments resulting from, among other things:
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general economic conditions or conditions generally affecting the semiconductor and software industries, except to the extent CSR and Zoran are
materially disproportionately affected;
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the announcement or pendency of the merger;
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compliance with the express terms and conditions of the merger agreement;
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acts of war, sabotage or terrorism, or any escalation or worsening of any such acts, earthquakes, hurricanes, tornadoes or other natural disasters, and
any effects arising prior to June 16, 2011 from the March 11, 2011 earthquake in Japan and the resulting tsunami and nuclear accident;
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in respect of Zoran, any effect arising from the April 12, 2011 announcement by Cisco Systems, Inc. to close down its Flip video camcorder
business;
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any failure to meet published revenue or earning estimates that may cause a change in the stock price or trading volume of the respective shares of CSR
and Zoran; or
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any change in accounting requirements or principles or any change in applicable laws, rules or regulations or the interpretation thereof.
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If such adverse changes occur and the merger is completed, the Combined Companys share price may
suffer.
During the pendency of the merger, CSR and Zoran may be prevented by the merger agreement from entering an
attractive merger or business combination with another party.
Under the merger agreement, Zoran is generally
restricted from acquiring any new businesses or entering into discussions or negotiations regarding alternative transactions, while CSR is restricted from entering into any significant acquisitions or undertaking any significant disposals and from
entering into discussions or negotiations regarding alternative transactions. As a result, the parties may be at a disadvantage to competitors who are free to pursue acquisition or sale opportunities.
Risks Related to the Combined Company
Strategy
The Combined Company may fail to anticipate key technological customer and market requirements on an accurate and timely basis.
The Combined Company may incorrectly assess trends in technological evolution, industry standards and/or the
requirements of its customers and end consumers. The Combined Company may invest its research and development monies in the wrong areas, develop products that fail to meet its customers needs, or fail to pursue product development
opportunities that its competitors seize. The Combined Companys success also depends on the development of these markets and adoption of the technologies by its customers. Technological and market trends are difficult to predict. If the
Combined Company is unable to predict market requirements, end customer demand for product features and evolving industry standards, its prospects and results of operations could be materially adversely affected.
The Combined Companys technologies could be integrated into other integrated circuits, decline in importance or be superseded
by superior technologies.
CSR derives the majority of its revenue from sales of its Bluetooth-based and GPS-based
products. The Bluetooth and GPS standards have each evolved over the time since their first introduction and an ever increasing array of features have been added to the chips required by CSRs customers. Similarly, Zoran sells products in
markets that are characterized by rapid technological change, evolving industry standards, frequent new product introductions, short product life cycles and increasing demand for higher levels of integration and smaller process geometries. The
Combined Company may fail to see or react to changes in the marketplace that fundamentally challenges its business model.
If
CSRs or Zorans products cease to be used as an anchor point around which to integrate other technologies, or if more customers were to integrate the functions that CSRs products support into their products, the Combined
Companys business could be materially adversely affected. The technologies which CSR brings to market, for example Wi-Fi, and other technologies which CSR has under development or which the Combined Company may release in the future, may be
integrated into one of the other chips, which could also materially adversely affect the Combined Companys future business. The Combined Company would also be materially adversely affected if its technologies were to decline in importance or
be replaced entirely as the prevailing technology or if superior technologies were developed that resulted in the Combined Companys products being less competitive.
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The average selling prices of the Combined Companys products are likely to
decrease rapidly.
The average selling prices of both CSRs and Zorans products have historically declined
significantly over their life, and this is likely to continue for the Combined Companys products. In the past, CSR and Zoran have regularly reduced the average selling prices of their products in response to competitive pricing pressures, new
product introductions by itself or its competitors and other factors, and the Combined Company expects to have to do so in the future.
The global recession in 2009 and 2010 caused a significant downturn in the semiconductor industry, resulting in CSRs and Zorans competitors becoming more aggressive in their pricing practices,
while more recently new suppliers in developing markets such as China have sought to obtain market share by offering alternative products to customers at lower prices. These are examples of practices which the Combined Company expects to continue in
the foreseeable future. The Combined Companys financial results could be materially adversely affected if it fails to offset reduced prices by increasing its sales volumes, reducing its costs, or successfully introducing new products at higher
prices.
Product, Technology and Execution
The Combined Company may fail to develop new products on a timely basis or fail to secure new orders with or develop new markets for its new technologies.
The Combined Companys success is dependent on its ability to develop new semiconductor solutions for existing and new markets,
qualify its products under industry standards or prescribed regulations and introduce those products in a cost-effective and timely manner, and convince leading equipment manufacturers to select those products for design into their own new products.
If it is not able to develop and introduce new products successfully and in a cost effective and timely manner, the business, prospects, financial condition and results of operations of the Combined Company will be materially adversely affected.
The development of new solutions can require the Combined Company to engage third parties to provide products or resources it
does not possess or to qualify its products under specific industry standards or prescribed regulations prior to release to its customers. The Combined Companys programs and the delivery of new products would be materially adversely affected
if these third parties were unable to provide it with the necessary support according to the Combined Companys deadlines or specifications or the products required further evaluation or approval prior to any applicable certification. The delay
of, or failure by, the Combined Company to launch and deliver new products in keeping with the expectations of its customers would result in a loss of market share and future customer orders, which in turn could have a material adverse effect on its
financial condition and results of operations and financial condition.
The Combined Companys success will also depend
on the successful development of new markets and the application and acceptance of new technologies and products in those new markets. For example, Zorans success has in the past depended on the ability of its customers to develop new products
and enhance existing products in the digital still camera, imaging and DVD markets and to introduce and promote those products successfully, as well as Zorans success in obtaining design wins for its products in these markets. These markets
may not continue to develop to the extent or in the time periods that the Combined Company currently anticipates due to factors outside its control. If new markets do not develop as the Combined Company anticipates, or if its products or those of
its customers do not gain widespread acceptance in these markets, the Combined Companys business, financial condition and results of operations could be harmed.
The length of product design cycles means the Combined Company could fail to timely deliver products that have the desired performance or features.
The design and sales cycle for CSRs integrated circuits can take up to 36 months, and in exceptional cases even longer. Achieving
volume production of products using CSRs integrated circuits can take an additional six months or more because its customers need to incorporate CSRs technology into their own products. The design
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and sales cycles of Zorans products, depending on its product line, typically range from one to two years. The time required for Zorans customers to incorporate Zorans products
into their own can vary significantly and generally exceeds several months.
These lengthy design cycles makes it difficult to
forecast product demand and the timing of orders, which may not ultimately materialize in accordance with the Combined Companys expectations. Actual customer requirements for the combination of multiple technologies and the way these are
incorporated into a customers products may differ from the Combined Companys expectations. Also, the Combined Company may fail to develop products with the combination of technologies or features that customers expect.
Even when a customer chooses the Combined Companys design, that customer may not order volume shipments, and in addition, the
delays inherent in lengthy design cycles increase the risk that the Combined Companys customers may seek to cancel or modify orders.
If the introduction of products is delayed, the Combined Companys ability to compete and maintain market share may be materially adversely affected.
The Combined Company will be subject to risks associated with the transition to smaller geometry process technologies.
To remain competitive, the Combined Company will need to continue to progressively transition both CSRs and
Zorans semiconductor and system-on-chip products to increasingly smaller line width geometries.
This transition will
require modifications to the design and manufacturing processes of some products as well as standard cells and other integrated circuit designs that may be used in multiple products. This may result in delays in product deliveries, increased
expenses or reduced manufacturing yields, all of which could materially adversely impact the Combined Companys results of operations. The Combined Companys ability to adopt and anticipate future standards and the rate of adoption and
acceptance of these standards into its products will be significant factors in maintaining or improving the Combined Companys competitive position and prospects for growth. Failure to transition to smaller geometries, particularly in the
development of system-on-chip solutions could harm the Combined Companys competitive position and is likely to materially and adversely affect the business and results of operations of the Combined Company.
Product Sourcing and Supply Chain
The third party foundries and subcontractors on whom the Combined Company will rely to manufacture, assemble and test their integrated circuit products may be unable to meet the requirements of the
business.
Neither CSR nor Zoran owns or operates a fabrication facility. Both CSR and Zoran are reliant on third
parties, in particular Taiwan Semiconductor Manufacturing Company Limited and Advanced Semiconductor Engineering, Inc., to manufacture, assemble and test their products on time.
Because of this reliance on third parties, the Combined Company remains subject to risks that CSR and Zoran have in the past experienced,
including:
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changes to the terms on which the third parties are able or willing to supply products and services to the Combined Company, including adverse changes
to pricing, inadequate capacity made available to the Combined Company for the manufacture or testing of its products in order to meet customer orders or to support in the delivery of finished products required to satisfy those orders, for example
by providing that capacity to other customers in preference to the Combined Company;
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natural disasters such as earthquake and tsunami (such as the recent events in Japan), pandemic or geopolitical instability resulting in the Combined
Companys suppliers being unable to obtain the raw
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materials to satisfy particular orders, interruptions in manufacturing or testing at the supplier sites, plant shut-downs, closures or cessation of business altogether;
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changes in working practices affecting product qualification or product quality, or changes in management personnel affecting working relationships
that may occur within suppliers to the Combined Company, including potentially as a result of reorganizations, mergers, acquisitions or disposals affecting the Combined Companys suppliers;
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financial difficulties which result in suppliers to the Combined Company being unable to obtain the raw materials or services to satisfy particular
orders, plant shut-downs or closures or cessation of business altogether;
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quality problems at suppliers manufacturing sites, resulting in lower yields, product failures and product returns; and
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limited control over suppliers delivery schedules, quality assurance and control and production costs.
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Because the Combined Company has no long-term supply contracts, its suppliers are generally not obligated to perform services or supply
products to the Combined Company for any specific period, in any specific quantities, or at any specific price, except as may be provided in a particular purchase order. If the Combined Company cannot source products it needs from one of its third
party suppliers, the Combined Company may be unable quickly to source its requirements from alternative suppliers. Any of these developments would adversely affect the Combined Companys ability to deliver products, undermine its perceived
reliability and harm its financial condition and results of operations.
The Combined Company will depend on limited
numbers of suppliers, and in some cases a sole supplier, for some critical components.
CSR has in the past purchased
critical components from a single supplier for certain products. Zoran has also relied on a limited number of independent contractors for the assembly and testing of its products. The loss of any such supplier, disruption of the supply chain, or
delays or changes in the design cycle time could result in delays in the manufacture and shipment of products, additional expense associated with obtaining a new supplier, impaired margins, reduced production volumes, strained customer relations and
loss of business or could otherwise materially adversely affect the business and results of operations of the Combined Company.
Errors, defects or bugs in the Combined Companys products could result in claims from customers.
CSR and Zorans products are designed for use in devices such as mobile telephones, automobiles, including in-dash navigation units,
personal navigation units, headsets and gaming devices, and these products are highly complex. The integrated circuits that CSR and the products that Zoran supply to their customers are required to operate to very precise specifications. The
Combined Company may not detect errors or defects in the research and development of a product or in its manufacture or bugs or susceptibility to connectivity viruses before it is supplied to customers or installed in the customers own
finished devices. Errors, defects or bugs could result in the Combined Companys customers devices being faulty, which would result in returns from consumers. If the devices failure were attributable to the Combined Companys
products, it may face claims for losses or damages, costs for rectifying the defects or replacing the product, and loss of revenue if customers cancel orders. Both CSR and Zoran have agreements with customers that provide warranty protection or
indemnities. Some of these agreements have no limitations on liability, and where there are limitations they may not be enforceable.
The Combined Companys insurance coverage against losses that might arise as a result of some product defects may not be sufficient to cover claims asserted against it, and may not continue to be
available generally or on reasonable terms. Product defects could also have longer term harmful effects on its reputation or its
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relationships with its customers or the market acceptance or sales of its products. Any of the foregoing could have a material adverse impact on the business, financial condition and results of
operations of the Combined Company.
The Combined Company will be highly reliant upon the success of its customers
products.
CSR and Zoran both rely on equipment manufacturers to select the Combined Companys products to be
designed into their products. Sales of the Combined Companys products are largely dependent on the commercial success of its customers products. If the customers products are unsuccessful, the Combined Companys business may
be materially adversely affected.
The Combined Company is not protected by long-term contracts with its customers.
The Combined Company generally does not enter into long-term purchase contracts with its customers, and it cannot be
certain as to future order levels from its customers. Customers generally purchase products of the Combined Company subject to short-term purchase orders which in some cases, the customer may revise or cancel altogether (for example, due to slowing
demand, economic conditions, change in end consumer purchasing preference or other events beyond the control of the customer such as natural disasters, like the recent earthquake and tsunami in Japan). The Combined Company cannot predict whether its
current customers will continue to place orders, whether existing orders will be cancelled, or whether customers who have ordered products will pay invoices for delivered products.
There are certain instances where Zoran has entered, and Zoran may continue to enter, into long-term contracts; in such instances, the
contract is generally terminable at the convenience of the customer. Termination or reduction in orders by customers could have a material and adverse effect on the operating performance and financial results of the Combined Company.
The Combined Company will rely on a few large customers for a significant portion of its revenue.
CSR works with a broad range of customers across its product portfolio but a few large customers represent a material portion of its total
revenue. CSRs largest customer accounted for approximately 14% of its net revenue in 2010, 11% in 2009 and 19% in 2008. CSRs top five customers accounted for approximately 42% of its net revenue in 2010, 43% in 2009 and 50% in 2008.
Zoran also derives most of its revenue from sales to a small number of customers. For the year ended December 31, 2010, four customers accounted for 13%, 12%, 11% and 11% of total revenues while sales to its ten largest customers accounted for
72% of its total revenues. In 2009, three customers accounted for 20%, 12% and 10% of its total revenues, respectively, and sales to its ten largest customers accounted for 69% of its total revenues.
The revenue and operating results of the Combined Company could be materially adversely affected if it:
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fails to maintain a good relationship with CSRs and Zorans key customers;
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fails to meet the customers product needs on a timely basis; or
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fails to achieve design wins for its products with CSRs and Zorans key customers.
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A change in ownership of a customer or their own strategy for their products could have a material adverse effect on the Combined
Companys business if the customer were to reduce or change its orders, seek alternate suppliers, or become unable or fail to meet its payment obligations to the Combined Company. If any of CSRs and Zorans key customers has
financial or other difficulties that affect its ability to maintain its business, it could reduce its orders to the Combined Company and thus adversely affect the business and financial performance of the Combined Company.
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Financial difficulties or failure of the Combined Companys distributors could
cause financial loss to the Combined Company.
Both CSR and Zoran supply a significant proportion of its products to
end customers through third party distributors. CSRs largest distributor accounted for approximately 12% of its net revenue in 2010, compared with 12% in 2009 and 24% in 2008. Zorans largest distributor accounted for approximately 11% of
its net revenue in 2010, compared with 20% in 2009 and 10% in 2008, as calculated under U.S. GAAP. The distributors are wholly independent third parties, who support CSRs and Zorans own direct marketing and sales. The current economic
environment presents significant challenges to the stability of distributors. These include:
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uncertain demand patterns, which mean distributors risk ordering more products than they require to satisfy CSR or Zorans end customers,
resulting in them holding too much stock;
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restrictions on credit terms, which mean distributors may have difficulty in selling products because end customers do not have the cash flow to enable
them to buy from the distributors; and
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fluctuating order patterns, which means end customers may amend existing orders or stop buying products because of insufficient demand,
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each of which could affect distributors ability to continue in business.
The Combined Companys business would be disrupted if end customers are unable to obtain the Combined Companys products from
the distributors on a timely basis. The Combined Company may be unable to collect amounts due from a failed distributor for products which have been supplied or to recover those products in default of non-payment. Each of these events could have a
material adverse effect on the Combined Companys business and financial performance.
If the Combined Company is
unable to protect its commercially sensitive information, its reputation could be harmed and its ability to conduct business could be impacted.
The information shared between CSR and third parties for the development of products and technologies and the terms on which CSR conducts business with its customers are commercially sensitive and highly
confidential. The Combined Companys business reputation and its operating performance and results would be adversely affected if such information were to become known by third parties.
Monitoring unauthorized use and disclosure of CSRs commercially sensitive information is difficult, and the Combined Company will
not be certain that the steps it has taken will prevent unauthorized use or disclosure of its commercially sensitive information. The laws of certain countries in which the Combined Companys products are or may be developed, manufactured or
sold, including various countries in Asia, may not protect its products or commercially sensitive information (to the same extent as do the laws of the United States and Western Europe), and thus make the possibility of unauthorized use and
disclosure of the Combined Companys commercially sensitive information more likely in these countries.
Intellectual
Property Risks
Intellectual property litigation, administrative proceedings, and disputes are common in the Combined
Companys industry. See
Legal Proceedings on page 146 incorporated herein by reference. Associated risks are discussed below.
The Combined Company is regularly and may continue to be subject to claims that it infringes third party intellectual property rights.
At any given time in the ordinary course of business, both CSR and Zoran have regularly received, and the Combined Company may continue to
receive, written notices or offers from competitors and others claiming to have patent and other intellectual property rights in certain technology and inviting it to license this technology
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and related patents asserted to be relevant to the Combined Companys products, including but not limited to chips, software and system solutions. These claims may also involve technology
and patents that may apply to a range of standards, such as the Bluetooth, WiFi, or the IEEE family of standards, or other wireless or wired standards, embodied in the Combined Companys products. These notices or offers have been made directly
and through customers and other third parties. Both CSR and Zoran have responded, or are in the process of responding, directly or indirectly through their customers and other third parties, to notices and allegations of infringement that CSR or
Zoran or their customers have received, and continue to respond regarding the offers with some of the parties that have sent the notices. As the Combined Company diversifies into different technologies, it may become more susceptible to these types
of infringement claims.
In the course of business in this industry, the Combined Company is and should be expected on an
ongoing basis to be involved in intellectual property litigation. This type of litigation customarily involves allegations of infringement and seeks unspecified damages, a permanent injunction against further infringement, a finding of willful
infringement, attorneys fees and costs. CSR, Zoran, and the Combined Companys respective customers who use their products are and have in the past been subject to material patent infringement litigation. As is commonplace in this
industry, the Combined Company and customers who use its products may be subject to further intellectual property claims by third parties alleging infringement of their patents or other intellectual property rights, including, for example, by third
parties whose sole business is the assertion of patent rights and intellectual property litigation.
Companies in the
semiconductor industry often aggressively protect and pursue their intellectual property rights, including by filing complaints with the United States International Trade Commission urging the International Trade Commission to investigate the
importation and sale of allegedly infringing products. International Trade Commission litigation typically involves the plaintiff seeking an exclusion order against future import of the infringing integrated circuits, chipsets and products including
the same, and a cease and desist order prohibiting the marketing, advertising, demonstrating, warehousing for distribution, offering for sale, selling, distributing, licensing or using the infringing products in the United States or transferring
them outside of the United States. If the Combined Company is unsuccessful in responding to an International Trade Commission investigation, the investigation could result, for example, in certain of the Combined Companys products being barred
from importation, marketing, distribution, licensing, and sale in the United States. Companies often file patent infringement lawsuits in U.S. district courts in parallel with International Trade Commission actions in order to seek damages,
exemplary damages, and attorneys fees and costs.
The defense of intellectual property claims, even if determined
in the Combined Companys favor or mutually settled, could result in significant costs and harm to the Combined Companies reputation.
Infringement claims that have been, and may in the future be, brought against the Combined Company could necessitate the expenditure of potentially significant funds and resources, including significant
attorneys fees, to defend or settle such claims. Litigation related to such claims, either before courts or before administrative bodies such as the International Trade Commission or in arbitration, can be complicated, protracted, and very
expensive with regard to litigation fees and costs or settlement. Intellectual property claims could also divert the attention of the Combined Companys management or other key employees. No assurance can be made that third parties will not
seek to commence additional litigation against the Combined Company, or that the pending and/ or additional litigation will not have a material adverse effect on the Combined Companys business. Any of the foregoing could have a material
adverse impact on the Combined Companys business, revenues, operating expenses, financial condition and results of operations. The outcome of any litigation is uncertain and either favorable or unfavorable outcomes could have a material
impact.
Intellectual property litigation is often protracted and can take months or years to resolve, even if mutually
settled between the parties in suit. While a claim is pending against the Combined Company, the Combined Companys customers may be reluctant to include the Combined Companys product as part of their future
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product design. For example, customers may be not wish to invest in including the Combined Companys products as part of future designs as a result of involvement in intellectual property
litigation, including if the customers believe there is risk that the Combined Companys product might ultimately be subject to an injunction or other legal remedy preventing sale, importation, or use of the Combined Companys product.
Therefore, even if the Combined Company is ultimately successful in defending an infringement action, negative publicity could already have a material adverse effect on its business, in addition to the expense, time, delay, and burden on management
of the litigation itself.
If the Combined Company is unsuccessful in defending any challenge to the Combined
Companys intellectual property rights, such intellectual property claims could subject the Combined Company to significant costs, adversely affect the Combined Companys ability to market its products, require the re-design of its
products or require it to seek licenses from third parties, and seriously harm both its reputation and operating results.
In addition to the risks of ongoing litigation during pendency, if the Combined Company is unsuccessful in any challenge to the Combined Companys rights to market and sell the Combined
Companys products, it may, among other things, be required to:
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pay actual damages, royalties, lost profits, exemplary damages, and/or the third partys attorneys fees and costs, which may be material;
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cease the development, manufacture, use, marketing and/or sale of products that use the intellectual property in question in light of a court-imposed
order or injunction or in light of an administrative order such as, for example, an International Trade Commission order;
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cease the importation of products into the United States or other countries in light of a court-imposed order or injunction or in light of an
administrative order such as an International Trade Commission order;
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expend significant resources in the attempt to modify or redesign its products, manufacturing processes or other technology so that it does not
infringe others intellectual property rights or to develop or acquire non-infringing technology, which may not be possible; and
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obtain licenses to the disputed rights, which could require the payment of substantial upfront fees and future royalty payments and may not be
available to it on acceptable terms, if at all, or to cease marketing the challenged products, and failure to obtain a license may be a competitive disadvantage as compared to competitors who are able to obtain such rights.
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Any of the outcomes above may materially and adversely harm the Combined Company.
The Combined Company may incur indemnity obligations under its contracts with customers.
Both CSR and Zoran have agreed to indemnify some customers for costs and damages of intellectual property infringement in some
circumstances. These agreements may subject the Combined Company to significant indemnification claims by its customers or others. Indemnification claims may subject the Combined Company to payment of attorneys fees and costs for the Combined
Companys attorneys as well as for customers attorneys. In addition, the Combined Company could be required to pay damages, exemplary damages, potentially substantial attorneys fees and court costs awarded against the customer, and
licensing or settlement costs. If an injunction is issued against the customer, the combined Company could be required to pay for alternatives for the customer which may or may not be available and customers losses resulting from the
injunction. The Combined Company could be required to redesign products at substantial cost, including increased operating cost and expenditure of the Combined Companys time and the time of management, and such redesigns may not be successful
technically or in solving the underlying legal concerns. To the extent the Combined Company disputes a customers right to indemnification, such dispute may harm the Combined
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Companys goodwill and reputation with the customer and may harm the possibility of future business from the customer. In some instances, a customer may demand discounts or refuse to pay
outstanding invoices in light of the customers indemnification demands. Each of CSR and Zoran have received and the Combined Company will continue to receive indemnification requests from customers that are involved in intellectual property
litigation implicating, directly or indirectly, the Combined Companys products.
In some instances, the CSR and
Zorans products are designed for use in devices used by potentially millions of consumers, such as, for example, mobile telephones, automobiles, including in-dash navigation units, personal navigation units, headsets and gaming devices.
CSRs server software is placed on servers providing wireless network services to end-users. Because of the widespread consumer uses of devices using the Combined Companies products, the Combined Company could be subject to considerable
exposure should an infringement claim occur against the Combined Company or its customers.
Protection of Intellectual
Property Rights
The Combined Company may fail or be unable to obtain sufficient intellectual property protection of
its proprietary technology.
Protecting the proprietary technology of CSR and Zoran is an important part of being able
to compete successfully. CSR and Zoran rely on a combination of patent, trade secret, copyright and trademark laws, non-disclosure and other contractual agreements and technical measures to protect their proprietary rights. These agreements and
measures may not be sufficient to protect the Combined Companys technology from third-party infringement, or to protect it from the claims of others. Monitoring unauthorized use of intellectual property is difficult, and CSR and Zoran cannot
be certain that the steps they have taken will prevent unauthorized use of the Combined Companys technology, particularly in countries where the laws may not protect the Combined Company proprietary rights as fully as in the United States and
Western Europe. If competitors are able to use the Combined Companys technology, its ability to compete effectively could be harmed.
The patent applications of CSR and Zoran may not provide sufficient protection for all competitive aspects of the Combined Companys technology or may not result in issued patents. Issued patents may
not provide competitive advantages to the Combined Company. For example, competitors may be able to effectively design around the Combined Companys patents, or the patents may be challenged, invalidated or circumvented. Competitors may also
independently develop technologies that are substantially equivalent or superior to the Combined Companys technology and may obtain patents that restrict the business of the Combined Company. Moreover, while CSR and Zoran hold, or have applied
for, patents relating to the technology used in the their products, some of their products are based in part on standards promulgated by standards-making organizations, for which they do not hold patents or other intellectual property rights.
The laws of some countries, such as China, in which CSR and Zoran operate and/or from which they derive significant amounts
of revenue, do not protect intellectual property to the same extent as, for example, the laws of the United States and Western Europe. Competitors may independently develop similar technologies or design around the Combined Companys patents
and could also successfully challenge any issued patent.
Even where CSR or Zoran has an issued patent, the Combined Company
may choose not to pursue all instances of patent infringement. The Combined Companys failure or inability to obtain sufficient patent protection could harm the Combined Companys competitive position and increase the Combined
Companys expenses if it is required to pay license fees under patents issued to others.
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Staff
Loss of key employees or failure to equip employees with the necessary skills and capabilities to support the Combined Companys strategy could hurt its competitive position.
The success of the Combined Company after the merger will depend to a significant extent upon its ability to retain
key CSR and Zoran senior executives and research and development, engineering, operations, marketing, sales, support and other personnel and its ability to continue to attract, retain and motivate qualified personnel in each of the territories in
which it currently or may in the future operate. The loss of the services of any of these key personnel without adequate replacement or the inability to attract new qualified personnel could have a material adverse effect on the Combined Company.
The Combined Company will also need to ensure that its employees have the skills and capabilities necessary for it to develop
new technologies and products to compete effectively and secure new business. The failure to provide adequate training or development, through lack of investment or planning could affect staff retention or mean that staff do not possess the
knowledge and skills needed by the Combined Company to deliver on its strategy. This could have a material adverse effect on the Combined Companys operating and financial results.
Internal infrastructure
The Combined Company will rely on information technology and automated systems to conduct its business.
Each of CSR and Zoran rely on, and the Combined Company will rely on, information technology and automated systems to support its operations globally. A failure or interruption to these systems could
materially and adversely affect the Combined Companys business and operations and as a result its financial performance. If its information technology systems were to fail or be disrupted this could adversely affect many aspects of the
Combined Companys business, from the development of products, to the ordering and delivery of products, to the accurate recording of financial information.
The loss of information technology systems could affect the Combined Companys development work, for example by delaying a project, causing errors to occur in the software it develops for its
products, or resulting in an inability to launch new products on time. In addition, loss of its systems could disrupt or cause delays in recording and satisfying customer orders, or result in errors in ordering of products from the Combined
Companys suppliers. The Combined Company could also lose the means to make decisions on the conduct of its business on a timely basis which could affect business or investment decisions.
If the Combined Companys information technology systems fail to evolve in conjunction with the needs of its business, for example
because of lack of investment or failure to predict future business needs, the Combined Companys ability to develop new products, maintain adequate operating systems or grow its business could be adversely affected. Any of these events could
result in loss of business, additional costs, or inaccurate recording of key business and financial information, which could materially adversely affect the Combined Companys business and results of operations.
Competition
The Combined Company may fail to compete successfully in a very competitive market.
The markets for both CSRs and Zorans products are highly competitive and rapidly evolving. CSR and Zoran compete in different product lines to varying degrees on the following characteristics:
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product system compatibility;
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product design and technology;
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timely introduction of new products;
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manufacturing yields; and
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sales and technical support.
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Given the intense competition in the semiconductor industry, if the Combined Companys products are not selected by current or potential customers, its business, financial condition and results of
operations will be materially adversely affected.
CSR is seeing increased competition throughout the market for wireless
connectivity products. The increased competition could result in more pronounced price reductions, reduced margins and/or loss of market share. Within their respective markets, CSR and Zoran face competition from public and private companies, as
well as the in-house design efforts of their customers. A number of CSRs and Zorans competitors have significantly greater financial, technical, manufacturing, marketing, sales and other resources than the Combined Company. The Combined
Company may fail to compete successfully, which could materially adversely affect its business and financial performance.
Economic, political and other risks
International economic, political and other risks may harm the Combined Companys results of operations.
CSR derives nearly all of its revenue from sales outside of the U.K. and, during 2010 and 2009, 93% of Zorans total revenues were derived outside of North America. Since both companies conduct
business internationally, they are, and the Combined Company will be, subject to economic, political and other risks in each of the countries in which they and their customers operate. Such risks include:
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disruption in commercial activity, a general economic slowdown and/or reduced demand for consumer products arising from military conflict, terrorist
activities or other local economic and political instability;
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the difficulties of complying with and consequences of non-compliance with multiple sets of laws and regulations, which can change often and may be in
conflict;
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restrictions on the import and export of the Combined Companys and its customers products, employment, taxes and other laws and regulations
that apply in its industry;
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complying with local business practices and managing cultural differences;
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working with local infrastructure and transportation networks; and
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designing products to comply with local regulatory requirements.
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If the Combined Company or its customers fail, or are unable, to manage these risks in the various markets in which it operates, the
Combined Companys results of operations may be materially adversely affected.
The recent natural disaster and
related nuclear accident in Japan could disrupt the operations of the Combined Company and its customers.
A number of
companies that maintain facilities in Japan provide the suppliers or customers of CSR and Zoran with materials and components. Even if these companies facilities are not located near the epicenter of the
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March 2011 Tōhoku earthquake, they may be affected by the consequences of the natural disaster and related nuclear accident at the Fukushima I nuclear power plant that have affected Japan,
which have included rolling blackouts, decreased access to materials and components and transportation interruptions. Some materials or components may be single-sourced from facilities in the areas affected by the natural disaster or related nuclear
accident. If these conditions persist, the Combined Company may experience shortages of materials or components required for the manufacturing of its products, which could limit its ability to supply these products. The Combined Company may also
experience delay or cancellation of orders from its customers, if they are unable to obtain adequate supplies of materials or components needed for the manufacture of their products that incorporate the Combined Companys chips, or if their
operations are otherwise disrupted by the natural disaster and related nuclear accident in Japan, or if consumer demand weakens in Japan due to the disaster and related accident. In such events, the revenue and results of operations of the Combined
Company could be materially and adversely affected.
The Combined Companys business is highly cyclical, is subject
to rapid change and evolving industry standards, and has experienced significant downturns.
Both CSR and Zoran operate
in the global semiconductor industry, which is highly cyclical, is subject to rapid change and evolving industry standards, and has experienced significant downturns, often in connection with maturing products and declines in general economic
conditions, including in connection with the recent global financial crisis. Such downturns have reflected decreases in product demand, production overcapacity, excess inventory levels and accelerated erosion in average selling prices, which can
have a material adverse effect on the business of the Combined Company. These factors have in the past caused substantial fluctuations in the revenue and results of operations of both CSR and Zoran and may in the future cause substantial
fluctuations in the revenue and results of operations of the Combined Company.
The Combined Company will be subject to
foreign currency exchange risks.
Substantially all of CSRs and Zorans sales and cost of sales are
denominated in U.S. dollars, which is CSRs functional currency.
A significant portion of CSRs operating costs and
taxation is denominated in pounds sterling. Although CSR puts in place forward exchange contracts 11 to 15 months in advance to fix the exchange rate of the U.S. dollar to the pound sterling for the majority of these costs, movements in the U.S.
dollar to pound sterling rate impact any pound sterling operating costs not covered by the forward contracts and, in the longer term, movements in the rate of exchange will impact all of CSRs pound sterling costs, as it will affect the rate
fixed by the forward contracts being put in place for future expenditures. CSR is also exposed to foreign exchange risks from costs recorded in other currencies, which are currently not covered by forward contracts.
A portion of the cost of Zorans operations, relating mainly to its personnel and facilities, is incurred in Chinese renminbi,
Israeli new shekels and other currencies other than U.S. dollars. As a result, Zoran bears the risk that the rate of inflation in relevant countries or the decline in value of the U.S. dollar compared to those foreign currencies will increase its
costs as expressed in U.S. dollars. To date, Zoran has not engaged in hedging transactions. In the future, the Combined Company may enter into currency hedging transactions designed to decrease the risk of financial exposure from fluctuations in the
exchange rate of the U.S. dollar against other currencies. These measures may not adequately protect the Combined Company from the impact of inflation or currency fluctuation on Zorans non-U.S. costs.
A material appreciation of the value of the U.S. dollar against the pound sterling could have a material adverse effect on the Combined
Companys current year results of operations, mainly due to revaluation losses on pound sterling denominated assets, as the forward contracts mentioned above provide a hedge to movements in most pound sterling denominated liabilities. A
material depreciation of the value of the U.S. dollar against the pound sterling could have a material adverse effect on the Combined Companys future results of operations, due to the recording of pound sterling operating expenses at a higher
U.S. dollar exchange rate.
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If there is a significant devaluation of the currency in a specific country, the prices of
the Combined Companys products will increase relative to that countrys currency; the Combined Companys products may be less competitive in that country and its revenues may be adversely affected. Also, the Combined Company cannot
be sure that its international customers will continue to be willing to place orders denominated in U.S. dollars. If they do not, the Combined Companys revenue and operating results will be subject to foreign exchange fluctuations, which
it may not be able to successfully manage.
Consumer demand
Depressed economic conditions may continue to adversely affect the Combined Companys financial performance.
The Combined Companys products are predominantly supplied for adoption into devices intended for the consumer
market. If depressed economic conditions were to persist or worsen, demand levels for the Combined Companys customers products, and therefore for the Combined Companys products, are likely to be materially adversely affected. CSR
expects that a substantial portion of the Combined Companys revenue will continue to be derived from the sale of its technologies to the consumer electronics market and therefore, to the extent that such sales of such consumer devices decline,
the revenue and results of operations and financial condition of the Combined Company could be materially adversely affected. Any difficulties experienced by customers and suppliers in accessing sources of liquidity could seriously disrupt their
businesses, which could lead to a significant reduction in their future orders of the Combined Companys products or the inability or failure on their part to meet their payment obligations to the Combined Company. In turn, this would have a
material adverse effect on the Combined Companys operating and financial results.
The Combined Company may not
accurately forecast demand for its products.
Accurate forecasting of demand in the volatile and dynamic sectors in
which the Combined Company operate and will continue to operate can be very difficult, particularly in times of rapidly changing economic conditions and uncertain demand from end consumers for retail products.
The level of inventory required in the Combined Companys business is sensitive to changes in the actual demand for its products
compared with its forecast of sales of those products and actual demand from the Combined Companys customers compared to forecasted demand has the potential to vary significantly. If changes in actual market conditions are less favorable than
those projected, the Combined Company will hold higher levels of inventory than is required to satisfy customer demand. This may result in the Combined Company holding inventory which it is unable to sell, due to customers no longer requiring the
product held in inventory. The Combined Company may need to reduce the selling price of the surplus products in order to sell the inventory, and this may still not be sufficient incentive to customers to enable it to sell the excess inventory. In
this situation the Combined Company may suffer reduced margins, inventory write-offs or both.
Similarly, in times of growing
demand, either generally or for particular products, the Combined Company may not order sufficient inventory to satisfy customer requirements and as a result not be able to meet customer orders in a timely manner. Obtaining additional supply may be
costly or impossible, and failing to meet customer needs may adversely affect customer relationships and reduce the Combined Companys revenue. Any of the foregoing could have a material adverse effect on the financial condition and results of
operations of the Combined Company.
Risks related to the industry
The Combined Companys quarterly and therefore annual revenue and operating results are affected by a wide variety of factors,
making them difficult to predict and, if it does not meet quarterly and therefore annual financial expectations, its share price will likely decline.
The Combined Companys quarterly and therefore annual revenue and operating results are affected by a wide variety of factors, making them difficult to predict. CSRs and Zorans results
have in the past fluctuated
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significantly from quarter to quarter, a trend that is expected to continue with the Combined Company. The Combined Companys operating results in some quarters or annual periods may be
materially below market expectations, which would cause the market price of the ordinary shares of CSR and American depository shares representing ordinary shares of CSR to decline. The Combined Companys quarterly or annual periods operating
results may fluctuate as a result of the risks discussed in this section and other factors, including:
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global economic conditions;
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the cyclical nature of the semiconductor industry;
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performance of the Combined Companys key customers in the markets they serve;
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delays in the introduction of new products;
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changes in the relative volume of sales of the Combined Companys chip sets, its premium software offerings and its intellectual property cores or
other products and product mix, which have significantly different average selling prices and gross margins;
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unpredictable volume, timing and cancellation of customer orders;
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the availability of required capacity from one or more suppliers;
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the availability, pricing and timeliness of delivery of components used in the Combined Companys customers products;
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changes in foreign exchange rates;
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the timing of new product announcements or introductions by the Combined Company or by its competitors;
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design losses to the Combined Companys competitors;
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the introduction or delay in launch of the Combined Companys customers products that use the Combined Companys technology;
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a decision by one of the Combined Companys customers to terminate use of the Combined Companys technology;
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seasonality in the Combined Companys various target markets;
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difficulties in managing the Combined Companys product transitions effectively;
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intangible asset write-downs; and
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developments in litigation proceedings involving the Combined Company, including fluctuations in litigation expenses.
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The Combined Company bases its planned operating expenses in part on its expectations of future revenue, and its expenses are relatively
fixed in the short term. If revenue for a particular period is lower than the Combined Company expects, it may be unable to reduce its operating expenses proportionately for that period, which would harm the Combined Companys operating
results.
Risks Related to Zoran
Zoran has been loss-making for each of the past three financial years to December 31, 2010.
Zoran has been loss-making for each of the past three financial years to December 31, 2010. This adds to the complexity and scale of the
challenges faced by the management within the Combined Company in seeking to achieve a return to profitability which could in turn impact the future growth and development within the rest of the business of the enlarged group, and which could have a
material and adverse effect on the overall financial performance of the Combined Company.
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Because Zoran has significant operations in Israel, the Combined Companys
business and future operating results could be adversely affected by events that occur in, or otherwise affect, the Middle East.
Zoran conducts a significant portion of its research and development and engineering activities, in addition to a portion of its sales and marketing operations, at a 109,700 square foot facility in Haifa,
Israel, where it employs approximately 380 people. As a result, Zoran operations are, and the Combined Companys operations will be, affected by the local conditions and the actions taken by the governments in the Middle East, which may disrupt
or hinder the Combined Companys business generally by delaying product development or interfering with global marketing efforts. For example, as a result of the heightened military operations in Gaza, some of Zorans employees were
conscripted into the Israeli armed forces for several weeks ending in January 2009. Additional employees may be called to active duty in the future. Extended absences could disrupt the Combined Companys operations and delay product development
cycles. In addition, military conflict, terrorist activities or other local economic and political instability in the Middle East, where there has been political instability in the past, could harm the Combined Companys business as a result of
a disruption in commercial activity or a general economic slowdown and reduced demand for consumer electronic products.
Regulation of the products of Zorans customers may slow the process of introducing new products and could impair the Combined
Companys ability to compete.
The Federal Communications Commission has broad jurisdiction over Zorans
target markets in the DTV and mobile phone business. Various international entities or organizations may also regulate aspects of Zorans business or the business of its customers. Although Zorans products are not directly subject to
regulation by any agency, the transmission pipes, as well as much of the equipment into which its products are incorporated, are subject to direct government regulation. For example, before they can be sold in the United States, advanced televisions
and emerging interactive displays must be tested and certified by Underwriters Laboratories and meet Federal Communications Commission regulations. Accordingly, the effects of regulation on Zorans customers or the industries in which
Zorans customers operate may in turn harm Zorans business. In addition, Zorans DTV and digital camera businesses may also be adversely affected by the imposition of tariffs, duties and other import restrictions on its suppliers or
by the imposition of export restrictions on products that it sells internationally. Changes in current laws or regulations or the imposition of new laws or regulations in the United States or elsewhere could harm Zorans business.
Risks Related to CSR Ordinary Shares and CSR American Depositary Shares
CSR may be treated as a Passive Foreign Investment Company.
As a non-U.S. corporation owning substantial cash assets, there is an ongoing risk that CSR may be treated as a Passive Foreign Investment
Company (PFIC) for U.S. federal income tax purposes depending on the ratio of the share price of ordinary shares of CSR (which affects the valuation of certain assets including goodwill) to CSRs holdings of cash and liquid assets such as bank
deposits and marketable securities. A non-U.S. corporation generally will be considered to be a Passive Foreign Investment Company for any taxable year in which 75 percent or more of its gross income is passive income, or 50 percent or more of
the average value of its assets are considered passive assets (generally, assets that generate passive income). This determination is highly factual, and will depend upon, among other things, CSRs market valuation and future
financial performance. CSR believes it was not a Passive Foreign Investment Company for the taxable year ended in December 31, 2010. CSR believes it will not be classified as a PFIC for the taxable year ending December 30, 2011, but if CSR were to
be classified as a PFIC for any future taxable year, holders of ordinary shares of CSR or CSR ADSs who are U.S. taxpayers would be subject to adverse U.S. federal income tax consequences.
Shareholders in countries other than the United Kingdom will suffer dilution if they are unable to participate in future
pre-emptive equity offerings.
Under English law, shareholders usually have pre-emptive rights to subscribe on a pro
rata basis in the issuance of new shares for cash. The exercise of pre-emptive rights by certain shareholders not resident in the
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United Kingdom may be restricted by applicable law or practice in the United Kingdom and overseas jurisdictions. In particular, the exercise of pre-emptive rights by U.S. shareholders would be
prohibited unless that rights offering is registered under the U.S. Securities Act or an exemption from the registration requirements of the U.S. Securities Act applies. Furthermore, under the deposit agreement for the CSR ADSs, the depositary
generally will not offer those rights to holders of CSR ADSs unless both the rights and the underlying securities to be distributed to holders of CSR ADSs are either registered under the U.S. Securities Act, or exempt from registration under the
U.S. Securities Act with respect to all holders of CSR ADSs. If no exemption applies and the Combined Company does not wish to register the rights offering, shareholders in the United States may not be able or permitted to exercise their pre-emptive
rights. CSR is also permitted under English law to disapply pre-emptive rights (subject to the approval of its shareholders by special resolution and investor committee guidance on the limits of any such disapplication) and thereby exclude certain
shareholders, such as overseas shareholders, from participating in a rights offering (usually to avoid a breach of local securities laws).
The rights of CSR shareholders will be governed by English law and differ from the rights of stockholders under U.S. law.
Because CSR is a public limited company incorporated under the laws of England and Wales, the rights of holders of its ordinary shares
and, therefore, certain of the rights of holders of CSR ADSs, will be governed by those laws and by the Articles. These rights differ from the typical rights of shareholders in U.S. corporations and from the rights of Zoran shareholders. For
example, the rights of shareholders to bring proceedings against CSR or against its directors or officers may be more limited under English law than under Delaware law. In addition, CSR shareholders will not have the same ability to bring legal
proceedings under English law on behalf of a class of shareholders or other claimants as they would under Delaware or U.S. laws. CSR shareholders should be aware that certain rights of CSR ADSs are also governed by the provisions of the deposit
agreement.
Shareholders in countries other than the U.K. may have difficulty in effecting service of process on CSR or
its directors in the U.S., in enforcing U.S. judgments in the U.K. or in enforcing U.S. securities laws in the U.K. courts.
Most of the directors of CSR and some of the experts named in this document are residents of countries other than the United States. As a result, it may not be possible for CSR shareholders in countries
other than the U.K. to effect service of process within the United States upon all of the directors and executive officers of CSR and some of the experts named in this document or on CSR, or to obtain discovery of relevant documents and/or the
testimony of witnesses. CSR shareholders in countries other than the U.K. may have difficulties enforcing in courts outside the United States judgments obtained in the U.S. courts against any of the directors of CSR and some of the experts named in
this document or the Combined Company (including actions under the civil liability provisions of the U.S. securities laws), and CSR shareholders in countries other than the U.K. may also have difficulty enforcing liabilities under the U.S.
securities laws in legal actions originally brought in jurisdictions located outside the United States.
The market
value of CSR ADSs and dividends may be adversely affected by fluctuations in the exchange rate between the U.S. dollar and the pound sterling.
Fluctuations in the exchange rate between the U.S. dollar and the pound sterling will affect the U.S. dollar price of CSR ADSs and the market value of CSR ordinary shares when expressed in U.S. dollars.
If the relative value of the pound sterling to the U.S. dollar declines, the U.S. dollar price of such CSR ADSs and the U.S. dollar equivalent of the pound sterling price of ordinary shares of CSR traded on the London Stock Exchange will also
decline. CSR has paid and may in the future pay cash dividends on its ordinary shares in pounds sterling. A decline in the relative value of the pound sterling to the U.S. dollar would also result in a decline in the U.S. dollar value of these
dividends.
The market price of ordinary shares of CSR, and CSR ADSs, is also expected to be volatile.
Global stock markets in general, and CSR ordinary shares in particular, have recently experienced significant price
and volume volatility. These outstanding ordinary shares are subject to significant fluctuations
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due to many factors, including but not limited to the pending merger, fluctuations in operating results, announcements regarding new products, product enhancements or technological advances by it
or its competitors, changes in earnings estimates by market analysts, and general market conditions or market conditions specific to particular industries. CSRs share price is subject to speculation in the press and the analyst community,
changes in recommendations by financial analysts, changes in investors or analysts valuation measures for its stock, changes in global financial markets and global economies and general market trends unrelated to its performance.
Technology stocks have experienced wide fluctuations in prices, which sometimes have been unrelated to their operating performance. The market price of the ordinary shares of CSR and CSR ADSs could be adversely affected by these factors and
fluctuations. In addition, any market concerns as to whether and when the merger will be consummated and delays in the timing of the consummation of the merger could also have an impact on the value of the ordinary shares of CSR and CSR ADSs. Even
if an active market for the CSR ADSs develops and continues, the market prices for such CSR ADSs and CSR ordinary shares may nevertheless be volatile.
Sales of a significant number of CSR ADSs that Zoran shareholders receive in the merger may depress the market price of such CSR ADSs as well as that of CSR ordinary shares.
In connection with the merger, Zoran shareholders may sell a significant number of the CSR ADSs they receive in the merger. These sales
could depress the market price of such CSR ADSs as well as that of CSR ordinary shares after completion of the merger.
There has been no prior market for CSR ADSs and the offering may not result in an active or liquid market for CSR ADSs.
Prior to this offering, there has not been a public market for CSR ADSs other than limited over-the-counter trading of
unsponsored CSR American depositary shares. Application has been made to list CSR ADSs on The NASDAQ Stock Market under the symbol CSRE. However, an active public market may not develop or be sustained after the offering. If an active
market for CSR ADSs does not develop after the offering, the market price and liquidity of such CSR ADSs may be adversely affected.
Liquidity in the market for CSR securities may be adversely affected by CSRs maintenance of two exchange listings.
Following this offering and after CSR ADSs are traded on The NASDAQ Stock Market, CSR plans to continue to list the ordinary shares of CSR
on the premium segment of the official list of the Financial Services Authority of the U.K. and to trade on the main market for listed securities of the London Stock Exchange. CSR cannot predict the effect of having its securities traded or listed
on both of these markets. This dual listing may, however, dilute the liquidity of CSRs securities in one or both markets and may adversely affect the development of an active trading market for CSR ADSs in the United States.
Holders of CSR ADSs may not have the same voting rights as holders of CSR ordinary shares and may not receive voting materials in
time to be able to exercise their right to vote.
Except as described in this proxy statement/prospectus and as
provided in the deposit agreement, holders of CSR ADSs will not be able to exercise voting rights attaching to CSR ordinary shares underlying the CSR ADSs issued pursuant to the merger on an individual basis. Each holder of CSR ADSs will appoint the
depositary or its nominee as the holders representative to exercise, pursuant to the instructions of the holder, the voting rights attaching to the CSR ordinary shares underlying the CSR ADSs issued pursuant to the merger. Holders of CSR ADSs
may not receive voting materials in time to instruct the depositary to vote, and it is possible that they, or persons who hold their CSR ADSs through brokers, dealers or other third parties, will not have the opportunity to exercise a right to vote.
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
The disclosure and analysis in this proxy statement/prospectus, including those relating to Zorans and CSRs
strategies and other statements that are predictive in nature, or that depend upon or refer to future events or conditions or contain forward-looking statements, including forward-looking statements within the meaning of Section 21E of the
Securities Exchange Act of 1934, as amended, referred to as the Exchange Act, Section 27A of the Securities Act of 1933, as amended, referred to as the Securities Act, and the Private Securities Litigation Reform Act of 1995, including
statements about:
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the expected growth of Zorans and CSRs product development, and design win traction and momentum;
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anticipated benefits or success of Zorans and CSRs current and announced products and the markets demand for the combinations of
technologies that the merger is intended to facilitate;
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projected cost and/or revenue benefits from the merger;
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potential success of Zorans and CSRs customers products;
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the impact and success of Zorans and CSRs cost-cutting and other restructuring initiatives;
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the impact of government regulation or other action;
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severity and impact on the Combined Company of the current global economic recession, weakened demand and increased competition;
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trends in attach rates for Bluetooth products, and the rates of acceptance of other technologies that are central to the Combined
Companys strategy;
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impact and success of Zorans and CSRs acquisitions or investments;
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Zorans and CSRs ability to design, produce and market multi-function products;
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Zorans and CSRs leadership positions in imaging and video and Bluetooth technologies, respectively;
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trends in average selling prices;
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Zorans and CSRs anticipated growth and cash needs, including Zorans and CSRs estimates regarding their respective capital
requirements and need for, and ability to obtain and impact of additional financing;
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the impact from changes in interest rates and foreign currency rates;
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Zorans and CSRs tax liability;
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Zorans and CSRs inventory and potential write-offs;
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Zorans and CSRs access to materials, parts and supplies;
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Zorans and CSRs relationships with employees;
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Zorans and CSRs critical accounting policies and adoption of accounting pronouncements;
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Zorans and CSRs disclosure controls and procedures;
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Zorans and CSRs dependency on establishing and maintaining relationships with established providers and industry leaders;
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Zorans and CSRs revenue, sources of revenue, gross margins and operating results and expenses;
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Zorans and CSRs rights to, and developments of new, intellectual property;
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Zorans and CSRs business plans or outlooks and any related forecasts or projections relating to any aspect of their respective businesses,
anticipated financial or operating results, including the financial
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forecast and synergies information made available by Zoran to Goldman Sachs for use in its analyses and the synergies anticipated to arise from the merger;
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Zorans and CSRs ability to predict product markets and compete in such markets;
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Zorans and CSRs acquisitions of or investments in complementary technologies;
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Zorans and CSRs stock and share price volatility;
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Zorans and CSRs compliance with environmental regulations;
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the merger and future events related to the merger and their potential effects on Zoran, Zoran stockholders and CSR; and
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Zorans and CSRs anticipated financial and operating results, as well as those of the Combined Companys plans, objectives,
expectations and intentions, cost savings and other statements related to the merger.
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These statements may
be identified by such terms as to, being, possible, may, should, address, designed to, provide, anticipate, believe,
expect, estimate, plan, will, intend, could, can and similar expressions or the negative of such expressions are intended to identify forward-looking statements.
These statements are based on the current beliefs and expectations of Zorans and CSRs managements and are not guarantees of future performance, and reported results should not be considered as an indication of future performance.
Zorans and CSRs actual results could differ materially from those discussed in these forward-looking statements as a result of numerous risks and uncertainties, including, among others:
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a deterioration in general economic conditions, and/or in consumer demand;
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Zorans and CSRs ability to keep pace with and anticipate rapid technological change;
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the success of Zorans and CSRs product offerings and the markets acceptance of those products;
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the introduction by competitors of products with better performance or functionality or at lower prices;
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changes to the market for digital solutions for digital entertainment and imaging and wireless connectivity capabilities;
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Zorans and CSRs successful integration of acquired businesses;
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competitive price pressures;
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dependence on, and qualification of, foundries to manufacture Zorans and CSRs products, and possible restrictions on production capacity;
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difficulty in forecasting demand, even in the short term;
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problems with key customer relationships;
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problems with key distributor relationships;
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Zorans and CSRs product warranties;
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Zorans and CSRs ability to attract, integrate and retain qualified personnel;
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the impact of Zorans and CSRs intellectual property indemnification practices;
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trends and uncertainties with respect to consumer demand for Zorans and CSRs products and Zorans and CSRs customers
products;
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developments in the semiconductor industry;
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general volatility in global economic and financial markets, including fluctuations in currency exchange rates, particularly those involving the U.S.
dollar and the pound sterling;
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-51-
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Zorans and CSRs ability to compete in foreign markets; and
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other risks and uncertainties, including those detailed from time to time in Zorans periodic reports filed with the Securities and Exchange
Commission, including Zorans Current Reports on Form 8-K, Quarterly Reports on Form 10-Q and Annual Report on Form 10-K.
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In addition, actual results of the merger could differ materially from those discussed in these forward-looking statements as a result of other risks and uncertainties, including, among others:
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Zorans and CSRs ability to satisfy the conditions to the proposed merger on the proposed terms and timeframe;
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the possibility that the proposed merger does not close when expected or at all, or that the companies may be required to modify aspects of the
proposed merger to achieve regulatory approval; and
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Zorans and CSRs sales to current and potential customers may be disrupted or deferred as a result of the merger.
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The forward-looking statements in this proxy statement/prospectus are qualified by the Risk
Factors beginning on page 29. Each statement speaks only as of the date of this proxy statement/prospectus (or any earlier date indicated in this proxy statement/prospectus) and neither Zoran nor CSR undertakes any obligation to update or
revise any forward-looking statements to reflect subsequent events or circumstances, unless required by law. Investors, potential investors and others should give careful consideration to these risks and uncertainties.
All references to Zoran mean Zoran Corporation and its subsidiaries, except where it is clear from the context that such term
means only the parent company and excludes subsidiaries.
All references to CSR mean CSR plc and its subsidiaries,
except where it is clear from the context that such term means only the parent company and excludes subsidiaries.
All
references to Microtune mean Microtune, Inc. and its subsidiaries, except where it is clear from the context that such term means only the parent company and excludes subsidiaries.
All references to the Combined Company mean CSR plc and its subsidiaries, including Zoran and its subsidiaries, after the
consummation of the merger.
Zoran, the Zoran logo, HDXtreme, Quatro, SupraFRC, SupraHD, SupraTV, SupraXD, Vaddis and VaddisHD
are trademarks and/or registered trademarks of Zoran Corporation and/or its subsidiaries in the United States and/or other countries.
The following are trademarks of Cambridge Silicon Radio Limited, a wholly owned subsidiary of CSR, some of which are pending registration as intent-to-use applications: AuriStream
®
, BCHS
®
, BLUE BOX
®
, BlueCore
®
, BlueLab
®
, BlueMedia
®
, BlueSuite
®
, BlueTunes
®
, BlueVox
®
, CREATING MAGIC
THAT MATTERS
®
, CSR, CSR & Logo
®
, CSR Synergy Logo
®
, CVC
Enabled
®
, Harmony, MusiCore, µEnergy, Powered for Life, PureSpeech
®
, SiRFAware, SiRFCity, SiRFatlasV, SiRFstarIV, UniFi, andWiCore
®
.
The following are trademarks of Audio Processing Technology Limited, a wholly owned subsidiary of CSR, some of which are pending registration as intent-to-use applications: Apt-X Live
®
, AptX, Apt-X, Apt-x & Logo
®
, and Apt-Q
®
. EGPS
®
, COVERGE
®
and CURSOR
®
are registered
trademarks of Cambridge Positioning Systems Ltd and UbiNetics
®
is a registered trademark of UbiNetics (Cayman
Islands) Limited, both of which are wholly owned subsidiaries of CSR.
-52-
The following are registered trademarks of SiRF Technology Holdings,
Inc., a wholly owned subsidiary of CSR: SiRF
®
, SiRFstar
®
, SiRFXTrac
®
, SiRFDRive
®
, SiRFLoc
®
, SiRFNav
®
, SiRFSoft
®
, SoftGPS
®
, Centrality
®
, Atlas
®
, Titan
®
, the SiRF name and orbit design logo and Multimode Location Engine
®
.
The following are trademarks of SiRF
Technology, Inc., a wholly owned subsidiary of CSR, some of which are pending registration as intent-to-use applications: SiRFstarIII, SiRFstarII, SnapLock, SnapStart , FoliageLock, SingleSat, TricklePower,
Push-to-Fix, SiRF Powered, SiRFLink, SiRFDiRect LocativeMedia, SiRFDemo , SiRFDemoPPC, SiRFecosystem, SiRFFlash, SiRFFlashEngine, SiRFFlashEngineEP, SiRFFlashMulti,
SiRFGetEE, SiRFInstantFix, SiRFInstantFixII, SiRFLocDemo, SiRFsandbox, SiRFstudio, SiRFView , Locations; Because Life Moves and The Power of Location Now, SiRFprima, SiRFatlas,
SiRFtitan, SiRFGenEE and SiRFLocMgr.
This proxy statement/prospectus also includes trade names, trademarks
and service marks of other companies and organizations.
-53-
THE ZORAN SPECIAL MEETING
Zoran is furnishing this proxy statement/prospectus to Zoran stockholders as part of the solicitation of proxies by Zorans board of
directors for use at the Zoran special meeting.
Date, Time and Place
The special meeting of Zoran stockholders will be held at Zorans principal executive offices located at 1390 Kifer Road, Sunnyvale,
California, on August 30, 2011, at 10:00 a.m., local time.
Purpose of the Special Meeting
The purpose of the special meeting is (i) to consider and vote upon adoption of the Amended and Restated Agreement and
Plan of Merger, dated as of June 16, 2011, by and among CSR, Zoran and Zeiss Merger Sub, Inc., a wholly owned subsidiary of CSR, providing for the merger of Zeiss Merger Sub, Inc. with and into Zoran and (ii) to approve the adjournment of the
special meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the meeting to adopt the merger agreement. Zoran will survive the merger as a wholly owned subsidiary of CSR. A copy of the
merger agreement is attached to this proxy statement/prospectus as Appendix A.
Zorans board of directors
recommends approval of the merger. On June 16, 2011, Zorans board of directors:
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determined that it is in the best interests of Zoran and Zoran stockholders that Zoran enter into the merger agreement;
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approved and declared advisable the merger and the merger agreement and the transactions contemplated by the merger agreement; and
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resolved to recommend that Zoran stockholders adopt the merger agreement.
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Solicitation of Proxies
This proxy
statement/prospectus is being furnished to you in connection with the solicitation of proxies by Zorans board of directors in connection with the special meeting of stockholders. The expense of filing, printing and mailing this proxy
statement/prospectus and the accompanying material will be shared equally by Zoran and CSR. In addition, Zoran has engaged MacKenzie Partners, Inc. to assist in the solicitation of proxies for the special meeting for a fee not to exceed $100,000,
along with customary charges for shareholder contact, reimbursement of reasonable out-of-pocket expenses and indemnification against certain losses, costs and expenses. Zoran will pay the costs related to the solicitation of proxies in connection
with the special meeting. Zoran may use the services of its directors, officer and employees, who will not be specially compensated, to solicit proxies from Zoran stockholders, either personally or by telephone, facsimile, letter or electronic
means.
Record Date for Voting and Voting Power
Only stockholders of Zoran as of the close of business on July 18, 2011, which is the record date for the special meeting, will be
entitled to receive notice of and to vote at the special meeting and any adjournments or postponements thereof. Each share of Zoran common stock held on the record date is entitled to one vote at the special meeting.
Vote Required of Zoran Stockholders
The affirmative vote of the holders of a majority of the shares of Zoran common stock outstanding as of the close of business on the record date is required to adopt the merger agreement. If a quorum is
present, a proposal to approve adjournments of the special meeting requires the affirmative vote of a majority of the votes cast by the stockholders entitled to vote and present in person or by proxy at the special meeting. As of the record date,
there were 50,109,237 shares of Zoran common stock outstanding and entitled to vote on the adoption of the merger agreement.
-54-
Abstentions and Nonvotes; Quorum
Because the required vote of the Zoran stockholders with respect to the merger agreement is based upon the total number of outstanding
shares of Zoran common stock, the failure to submit a proxy card, to vote by telephone or through the Internet or to vote in person at the special meeting, or the abstention from voting by a stockholder, will have the same effect as a vote against
adoption of the merger agreement. If a stockholder does not vote on the proposal to adjourn the special meeting, it will have no effect on the outcome of the vote on that proposal. Brokers holding shares of Zoran common stock as nominees will not
have discretionary authority to vote such shares in the absence of instructions from the beneficial owners thereof, so the failure to provide voting instructions to your broker will also have the same effect as a vote against the adoption of the
merger agreement.
The holders of a majority of the shares of Zoran common stock outstanding as of the close of business on
the record date must be present, either in person or by proxy, at the special meeting to constitute a quorum. Any Zoran shares held in treasury by Zoran or by any of its subsidiaries are not considered to be outstanding for purposes of a quorum.
Abstentions, if any, will be counted as present for establishing a quorum. Once a share is represented at the special meeting, it will be counted for the purpose of determining a quorum at the special meeting and any adjournment or postponement of
the special meeting, unless the holder is present solely to object to the special meeting.
How to Vote
Vote by Telephone
Record holders and many street-name holders may vote by telephone. Using any touch-tone telephone, please call the toll-free number on your proxy card. Have your proxy card or voting instruction form in
hand and when prompted, enter the control number shown on your proxy card or voting instruction form. Follow the voice prompts to vote your shares.
Vote on the Internet
Record holders and many street-name holders may vote
on the Internet. Please access the website indicated on your proxy card or voting instruction form provided by your broker. With your proxy card or voting instruction form in hand, follow the instructions set forth in your proxy card or voting
instruction form. You will be prompted to enter the control number shown on your proxy card or voting instruction form in order to cast your vote via the Internet.
Vote by Mail
You can submit your proxy by signing, dating and returning it
in the postage-paid envelope provided.
Voting at the Special Meeting
The method by which you vote will not limit your right to vote at the special meeting if you decide to attend in person. If your shares
are held in the name of a bank, broker or other holder of record, you must obtain a legal proxy, executed in your favor, from the holder of record to be able to vote in person at the special meeting.
Revocability and Voting of Proxies
If you sign and submit a proxy, your shares will be voted at the special meeting as you indicate on your proxy card. If no instructions are indicated on your signed proxy card, your Zoran shares will be
voted FOR the adoption of the merger agreement.
-55-
Any Zoran stockholder of record who has executed and returned a proxy card or properly voted
by telephone or Internet and who for any reason wishes to revoke or change his or her proxy may do so by:
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submitting a proxy by telephone or through the Internet at a later time following instructions on the enclosed proxy card;
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delivering written notice of revocation to the Secretary of Zoran at the below address at any time before the commencement of the special meeting; or
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attending the special meeting in person and voting the shares represented by such proxy.
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Please note that any Zoran stockholder whose shares are held of record by a broker, bank or other nominee and who provides voting
instructions on a form received from the nominee may revoke or change his or her voting instructions only by contacting the nominee who holds his or her shares for instructions on voting revocation procedures. Such stockholders may not vote in
person at the special meeting unless the stockholder obtains a legal proxy from the broker, bank or other nominee. Attendance at the special meeting will not, by itself, revoke prior voting instructions.
Revocation of a proxy by written notice or execution of a new proxy bearing a later date should be submitted to:
Corporate Secretary
Zoran Corporation
1390 Kifer Road
Sunnyvale, California 94086
Phone: (408) 523-6500
Holders of Zoran common stock who own their shares in
street name should contact their broker or financial institution for instructions on the voting revocation procedures of their organization.
Please do not include stock certificates when returning the enclosed proxy card.
Delivery of Documents to Shareholders Sharing an Address
If you are a beneficial owner, but not the record holder,
of Zoran common stock, your broker, bank or other nominee may only deliver one copy of the proxy statement/prospectus to multiple stockholders who share an address unless that nominee has received contrary instructions from one or more of the
stockholders. Zoran will deliver promptly, upon written or oral request, a separate copy of the proxy statement/prospectus to a stockholder at a shared address to which a single copy of the document was delivered. A stockholder who wishes to receive
a separate copy of the proxy statement/prospectus, now or in the future, should submit their request to Zoran by telephone at (408) 392-8480 or by submitting a written request to Zoran Corporation, Investor Relations, 1390 Kifer Road,
Sunnyvale, California 94086. Beneficial owners sharing an address who are receiving multiple copies of proxy materials and annual reports and wish to receive a single copy of such materials in the future will need to contact their broker, bank or
other nominee to request that only a single copy of each document be mailed to all shareholders at the shared address in the future.
Other Matters
It is not expected that any other matter will be presented for action at the special meeting. If any
other matters are properly brought before the special meeting, the persons named in the proxies will have discretion to vote on such matters in accordance with their best judgment. The grant of a proxy will also confer discretionary authority on the
persons named in the proxy as proxy appointees to vote in accordance with their best judgment on matters incident to the conduct of the special meeting, including (except as stated in the following sentence) postponement or adjournment for the
purpose of soliciting votes. However, shares represented by proxies that
-56-
have been voted AGAINST the adoption of the merger agreement and the merger will not be used to vote FOR postponement or adjournment of the special meeting to allow
additional time to solicit additional votes FOR the adoption of the merger agreement and the merger.
Admission to the Meeting
The following are eligible for admission to the special meeting:
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all stockholders of record at the close of business on July 18, 2011;
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persons holding proof of beneficial ownership as of the record date, such as a letter or account statement from the persons broker;
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persons who have been granted proxies; and
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such other persons that Zoran, in its sole discretion, may elect to admit.
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All persons wishing to be admitted to the special meeting must present photo identification and proper proof of share ownership.
Questions About Voting the Shares of Zoran Common Stock
If you have any questions about how to vote or direct a vote in respect of your Zoran common stock, you may call MacKenzie Partners, Inc.,
the firm assisting Zoran in the solicitation of proxies, toll-free at (800)
322-2885 or at (212) 929-5500 (call collect).
Appraisal Rights
Record holders of Zoran common stock who do not vote in favor of the adoption of the merger agreement and otherwise comply with the
requirements and procedures of Section 262 of the Delaware General Corporation Law, which we refer to in this proxy statement/prospectus as the DGCL, are entitled to exercise their rights of appraisal, which generally entitle
stockholders to receive a cash payment equal to the fair value of their Zoran common stock in connection with the merger. A detailed description of the appraisal rights and procedures available to Zoran stockholders is included in The
MergerAppraisal Rights beginning on page 104. The full text of Section 262 of the DGCL is attached as Appendix E to this proxy statement/prospectus.
-57-
THE MERGER
Background of the Merger
Zorans board of directors and management team regularly evaluate Zorans business and operations, Zorans long-term strategic goals, alternatives to maximize stockholder value and
Zorans prospects as an independent company. Throughout the history of Zoran, Zorans board and management team have regularly reviewed and assessed trends and conditions impacting Zoran and the markets served by Zorans products as
well as Zorans position in the markets in which Zoran operates. Zorans board and management team recognize that Zoran operates in an industry that is characterized by intense competition, rapidly changing technology, long design cycles,
short product life cycles, aggressively competitive pricing and decreasing average selling prices. Moreover, many of Zorans competitors are larger, more diversified companies, with substantially greater financial resources and capacity to
invest in research and development than Zoran.
In light of these market dynamics and pressures, Zorans board and
management team have been actively evaluating ways for Zoran to remain competitive and to increase its revenues, reduce its operating costs and improve its financial performance. As part of this process, Zorans board determined to undertake a
strategy of cost reduction measures while pursuing organic and inorganic growth opportunities. For example, in conjunction with its third quarter of 2010 earnings announcement, Zoran announced that it would right size its business by
discontinuing investments in its DVD solutions business. As a result, Zoran reduced its headcount in DVD by over 70 percent by the end of 2010, keeping only a team necessary to support existing customers. In addition, in 2010 Zoran acquired
Microtune to enhance Zorans overall strategy, as Microtunes technologies significantly supported Zorans strategic and growth objectives in the set-top box and DTV markets at the time. Zoran has historically invested a significant
percentage of its net revenue in research and development, and that percentage has increased over the past several years as Zoran has endeavored to expand its market growth opportunities.
Zorans board also regularly reviews the strategic alternatives available to Zoran. From time to time, Zorans board and
management team have engaged in discussions regarding a possible sale or strategic combination of Zorans entire business or certain business units with other complementary businesses. For example, and in addition to the events described below,
between 2008 through 2010, Zoran had discussions with at least three other strategic partners. These discussions included the potential acquisition of one company, the potential sale of Zoran to another company and the potential divestiture of
certain businesses to a third company.
Discussions regarding a possible strategic relationship with CSR first occurred in
February 2008 when Dr. Levy Gerzberg, Zorans President and Chief Executive Officer, Dr. Isaac Shenberg, Zorans Senior Vice President of Corporate Marketing and Business Development and Coby Sella, then Zorans General
Manager of its Mobile Division, met several times with Jon Hudson, then CSRs Senior Vice President, PC, Automotive and Consumer Strategic Business Units, Dr. Jeff Torrance, CSRs Vice President, Strategic Business Development, and
James Collier, then CSRs Chief Technical Officer, among others, regarding potential collaboration in the area of ultra wideband (UWB) communication in cameras. There was no discussion regarding a business combination at that time. While these
discussions did not lead to any form of partnership, primarily due to the limited success of the UWB technology in cameras at that time, it nonetheless introduced Zorans management to the complementary nature of CSRs product line.
On January 22, 2010, Dr. Shenberg and William Queen, Senior Director, Business Development of Zoran, and
Dr. Torrance and Greg Turetzky, Senior Director of Marketing of CSR, discussed possible collaboration opportunities in the GPS, Wi-Fi and camera segments, as well as other general business developments.
On February 26, 2010, Kanwar Chadha, CSRs Chief Marketing Officer and an Executive Director of CSR, called Dr. Gerzberg
and offered to meet and discuss possible strategic collaborations. As a result of this call, Dr. Shenberg and Mr. Queen met again with Mr. Chadha on March 17, 2010, and continued to explore a potential collaboration between or
combination of the companies.
-58-
On March 16, 2010, Dr. Gerzberg and Joep van Beurden, CSRs Chief Executive
Officer, met in Taipei in connection with the Global Semiconductor Association Memory Conference. They discussed the possibility of exploring a strategic combination further and tentatively agreed to meet at a later date.
On April 23, 2010, Dr. Gerzberg met with the Chief Executive Officer of a company with businesses and products synergistic in
part to those of Zoran, which company is referred to herein as the other potential strategic partner. The conversation focused on potential areas for collaboration in the home entertainment area and related home networking and
connectivity. Zoran and the other potential strategic partner agreed to continue these discussions at Zorans offices and to include other staff members from both companies.
On June 3, 2010, Dr. Gerzberg met with the Chief Executive Officer of the other potential strategic partner at Zorans
office in Sunnyvale. They discussed each companys products and markets and identified several potential areas for synergy.
On June 17, 2010, members of Zorans management met with the management of the other potential strategic partner and discussed the other potential strategic partners history and
businesses.
On June 17 and June 23, 2010, Dr. Gerzberg and Mr. van Beurden discussed a possible
combination of Zoran and CSR, focusing on the complementary product mix, scale of the combined companies, growth opportunities, integration capabilities and other synergies and potential benefits of a combination. They instructed Dr. Shenberg
and Dr. Torrance to develop an action plan for a possible combination. To facilitate continuation of the companies discussion, Zoran and CSR entered into a confidentiality and standstill agreement on June 29, 2010.
Dr. Shenberg, Dr. Torrance and Mr. Chadha held a meeting on July 28 and 29, 2010, in San Jose and Sunnyvale,
California and reviewed, in general terms, the potential opportunities represented by a strategic combination between Zoran and CSR. Dr. Shenberg and Dr. Torrance concluded there were significant revenue synergy opportunities with the
companies respective product lines. Other effects of such potential combination were discussed, for example various scale benefits, including with respect to lower manufacturing costs, sales collaboration, shared technologies and reduction of
corporate overheads.
On August 6, 2010, Dr. Gerzberg and Mr. van Beurden discussed possible synergies in
multiple product lines across the two companies, and Mr. van Beurden presented a schedule for combining the two companies.
On September 7, 2010, the Zoran board held a special meeting and conducted a detailed review of the proposed merger with Microtune,
the negotiation history between Zoran and Microtune, and the strategic rationale behind the transaction. After an extensive and detailed discussion among the members of Zorans board and with Zorans legal and financial advisors,
Zorans board approved continuing to pursue the proposed merger with Microtune.
On September 8, 2010, Zoran
announced that it had entered into a definitive agreement to acquire Microtune. On September 9, 2010, Dr. Gerzberg and Mr. van Beurden spoke to arrange a call for September 12, 2010. On September 12, 2010, Dr. Gerzberg
and Mr. van Beurden discussed in more detail the potential strategic fit between Zoran and CSR.
On September 21,
2010, Dr. Gerzberg met with the Chief Executive Officer of the other potential strategic partner in Los Altos, California and discussed a possible combination of the two companies.
On September 27, 2010, Mr. van Beurden met with Dr. Gerzberg at Zorans facilities in California and discussed a
process and further explored the possible combination of the two companies.
Also in September 2010, Dr. Shenberg and
Dr. Torrance participated in multiple email and phone conversations discussing a potential strategic combination.
-59-
On October 1, 2010, Zoran contacted Goldman Sachs to discuss their possible engagement
as financial advisor to Zoran. On October 7, 2010, Goldman Sachs signed a confidentiality agreement with Zoran and on October 11, 2010, Zoran met with representatives of Goldman Sachs to discuss their capabilities and the various
discussions Zoran was having with CSR and the other potential strategic partner. Zoran and the representatives of Goldman Sachs also discussed other potential partners.
On October 4, 2010, Dr. Gerzberg, Dr. Shenberg, Mr. van Beurden and Dr. Torrance, as well as Karl Schneider, Zorans Senior Vice President, Finance and Chief Financial
Officer, and Will Gardiner, CSRs Chief Financial Officer, met and discussed CSRs business and a possible combination between Zoran and CSR.
On October 6, 2010, Zorans management met with management of CSR for further business and financial discussions. Management of CSR presented more detailed information regarding CSRs
business and its financial results. The relative contribution of each company was discussed, as were potential cost and revenue synergies of such combination. A tentative timeline for a potential combination was also presented.
On October 8, 2010, Dr. Gerzberg and Dr. Shenberg met with members of management of the other potential strategic partner.
During this meeting, the parties described their respective businesses, including product lines, key technologies and markets and potential synergies. The parties agreed to have further conversations regarding a potential strategic business
combination between the two companies.
On October 12, 2010, Dr. Gerzberg and Mr. van Beurden discussed
information to be presented to their respective boards regarding the other company and a potential combination.
On
October 14, 2010, Dr. Gerzberg met with the Chief Executive Officer of the other potential strategic partner and discussed areas of potential synergies between the two companies and what a combination of the two companies might look like.
On October 20, 2010, Zorans board held a regularly scheduled meeting. Zorans management reported on
Zorans Quarterly Business Summary and Outlook, Annual Operating Plan, preliminary 2011 and four-year plan, and certain corporate governance matters. Throughout these presentations, the Zoran board engaged management in detailed discussion on a
number of key issues. The Zoran board discussed in detail Zorans strategic position and reviewed various strategic alternatives available to Zoran, including several potential merger partners, including CSR and the other potential strategic
partner. Management updated Zorans board on its discussions with various parties. The Zoran board instructed management to continue to have conversations with potential strategic partners and to keep the Zoran board apprised of these
discussions.
On November 1, 2010, the Ramius Group announced in a Schedule 13D filing that it had acquired over 5% of
the outstanding shares of Zoran. According to the Schedule 13D, the Ramius Group began acquiring shares of Zoran in late October 2010.
On November 9, 2010, Mr. van Beurden and Dr. Torrance, along with Ronald Mackintosh, CSRs Chairman, met in Israel with Dr. Gerzberg and Dr. Shenberg, along with Uzia Galil,
then Zorans Chairman, to discuss the potential benefits to each company and their respective shareholders of a combination of Zoran and CSR and the general nature of such a potential combination.
On November 11, 2010, Dr. Shenberg and Dr. Torrance met to discuss possible synergies from a combination of the two
companies, including a further discussion of potential revenue and cost synergies and potential areas of additional collaboration that could be undertaken in a combined enterprise.
On November 14, 2010, Mr. van Beurden called Dr. Gerzberg to tell him that CSR had received Board approval to make a
formal indication of interest to Zoran regarding a strategic combination between the two companies. Due to the demands on Zorans management related to closing the Microtune transaction, Dr. Gerzberg requested that CSR not make any formal
proposal regarding a possible combination until after Zoran closed its acquisition of Microtune.
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On November 16, 2010, Zoran extended its mutual non-disclosure agreement with the other
potential strategic partner. Later that day, Dr. Gerzberg, Dr. Shenberg and Mr. Schneider met with their counterparts at the other potential strategic partner and discussed the respective histories and the business of the two
companies and further explored the potential synergies between the two companies.
On November 18, 2010, representatives
of the Ramius Group met for two hours with the executive management of Zoran to discuss certain publicly available information relating to the history and business of Zoran. No discussions regarding board representation for the Ramius Group took
place at this meeting.
On November 19, 2010, Dr. Gerzberg, Dr. Shenberg and Mr. Schneider met with the
Chief Executive Officer and Chief Financial Officer of the other potential strategic partner, who reviewed materials summarizing the rationale and business model of a possible combination between Zoran and such party. This model assumed that the
deal would be structured as a stock-for-stock transaction.
On November 21, 2010, Dr. Gerzberg provided Mr. van
Beurden with an update on the closing of the Microtune transaction.
On November 23, 2010, Dr. Gerzberg updated
Zorans board by email on managements various discussions with CSR and the other potential strategic partner.
On
November 30, 2010, Zoran completed its acquisition of Microtune.
On December 1, 2010, CSR sent a formal indication
of interest to Zoran for a stock-for-stock business combination whereby Zorans stockholders would receive 35% ownership in the Combined Company. In addition, the indication of interest stated that Zoran would enter into exclusive negotiations
with CSR until the earlier of January 17, 2011, or such time as the parties determined not to proceed with the potential transaction. CSR also indicated that if a combination with Zoran were agreed to, CSR would likely extend its existing share
buyback program beyond completion of the merger, subject to approval of the requisite authorities.
On December 3, 2010,
Zorans board met with management and Jones Day, Zorans legal counsel. Goldman Sachs prepared materials for management discussing its preliminary financial analysis of a possible combination between Zoran and each of CSR and the other
potential strategic partner.
On December 5, 2010, Zorans board met with management, Jones Day and Goldman Sachs.
Goldman Sachs presented an update on discussions with CSR and the other potential strategic partner and a summary of each partys proposal for a business combination with Zoran and presented a possible timeline for arriving at a negotiated
transaction with CSR, the other potential strategic partner or another party. The Zoran board discussed the pros and cons of engaging in negotiations with either or both parties, and discussed other parties that might be interested in a transaction
with Zoran. The Zoran board instructed management to continue the discussions with CSR. The Zoran board determined to formally engage Goldman Sachs as its financial advisor for any possible business combinations.
On December 6, 2010, the Ramius Group filed a consent solicitation statement with the SEC and delivered its written consent to Zoran
to remove Zorans six independent directors and replace them with six directors proposed by the Ramius Group.
On
December 7, 2010, Zorans board met to discuss the Ramius Groups consent solicitation. Goldman Sachs and Jones Day reviewed with Zorans board the Ramius Group proposals, the biographical information of the Ramius Groups
nominees and Zorans potential responses to the consent solicitation, including the possibility of implementing a shareholder rights plan. Goldman Sachs led the Zoran board through an analysis of Ramius prior actions with other companies,
as well as those of other activist stockholders, and reviewed the history of Ramius activities vis-a-vis Zoran. At the Zoran boards request, Goldman Sachs also discussed with
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the Zoran board the structure, impact and potential terms of a shareholder rights plan. Questions were asked and the members of the Zoran board of directors engaged in a lengthy and detailed
discussion with Goldman Sachs and Jones Day on these topics.
On December 8, 2010, Dr. Gerzberg called the Chief
Executive Officer of the other potential strategic partner and discussed the Ramius consent solicitation and overall process of the potential strategic combination.
On December 9, 2010, Zorans board met again to consider in more detail proposed responses to the consent solicitation and a shareholder rights plan. The Zoran board determined that it would not
implement a rights plan at that time.
On December 10, 2010, Zoran extended and amended its confidentiality and
standstill agreement with CSR. Between December 10, 2010 and December 12, 2010, management of Zoran and CSR, with the assistance of their respective financial advisors, conducted extensive financial and business due diligence on each
others company.
On December 14, 2010, Dr. Gerzberg and Dr. Shenberg met with certain members of
management of the other potential strategic partner and discussed the complementary nature of their respective product lines. Management of the other potential strategic partner indicated that Zorans situation with the Ramius Group had to be
resolved for them to seriously continue any discussions regarding a business combination with Zoran.
Goldman Sachs and Zoran
signed an engagement letter on December 15, 2010, for Goldman Sachs to provide financial advisory assistance in considering the proposal made by CSR as well as any proposal that might be made by the other strategic partner or any other
potential partner.
On December 16, 2010, Zorans board met with management and its legal and financial advisors to
discuss Zorans strategic plan. The Zoran board also discussed Zorans strategic alternatives, including exiting the DTV business, a business combination with CSR, the other potential strategic partner or other potential partners with
which it had not yet engaged in discussion, and remaining an independent public company. Zorans board also received an update on the Ramius consent solicitation.
On December 17, 2010, Dr. Gerzberg and Mr. Schneider met in Zorans Sunnyvale office with Jeff Smith of the Ramius Group and discussed the Ramius Groups consent solicitation.
Dr. Gerzberg and Mr. Schneider informed Mr. Smith that he could submit certain Ramius Group nominees through Zorans internal director nomination processes as opposed to through the consent solicitation process. Mr. Smith
declined Zorans proposal.
On December 19, 2010, Dr. Shenberg met with members of management of the other
potential strategic partner to review the financial information that the other potential strategic partner had prepared in connection with the evaluation of a combination of the two companies.
At various times in December 2010, Dr. Gerzberg requested that the other potential strategic partner make a specific, detailed
proposal regarding a business combination with Zoran, but no specific, detailed proposal was ever received.
On
December 21, 2010, Mr. van Beurden had a video conference with Dr. Gerzberg and Phil Young, a Zoran Director, to review CSRs business and the rationale for the merger.
On December 22, 2010, Zorans board met with management and its legal and financial advisors. Goldman Sachs reviewed the
alternatives of CSRs offer to consider either a stock buyback of CSR shares, issuing a cash dividend after the closing of the merger or permitting Zoran to issue a cash dividend before the Closing of the merger. Then Goldman Sachs discussed
with the Zoran board its preliminary financial analysis of a potential
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transaction with CSR or the other potential strategic partner. The Zoran board and Goldman Sachs discussed this analysis and Zorans board asked questions of Goldman Sachs. The Zoran board
also discussed the attractiveness and potential synergies of entering into a business combination with the other potential strategic partner, as well as other parties. The Zoran board desired to explore other avenues of creating stockholder value
before proceeding further with negotiations with CSR. The Zoran board instructed Goldman Sachs to inquire of other potential buyers of Zoran on a preliminary basis whether there might be an interest in an acquisition of Zoran should Zoran determine
to solicit it. The other potential buyers to be contacted were large capitalization, strategic companies that were anticipated to pay cash in such a transaction and, therefore, are referred herein as large cap buyers. The Zoran board also asked
Goldman Sachs to prepare an analysis of potential merger partners to present to the Zoran board. Zorans board also instructed Dr. Gerzberg to inform Mr. van Beurden, and Goldman Sachs to inform CSRs financial advisors, J.P.
Morgan Limited, which conducts its U.K. investment banking activities as J.P. Morgan Cazenove, that only limited due diligence could be conducted until valuation was agreed upon.
On December 27, 2010, the Ramius Group notified Zoran of its intention to nominate directors at Zorans 2011 annual meeting of
stockholders.
Between January 3, 2011 and January 11, 2011, Goldman Sachs had preliminary conversations with five
potential large cap buyers to inquire whether they might have any interest in an acquisition of Zoran should Zoran determine to solicit such interest.
On January 7, 2011, the Ramius Group revoked its consent delivered on December 6, 2010, and submitted a new consent with respect to its proposed corporate actions, including replacing all of
Zorans independent directors.
On January 8, 2011, Dr. Shenberg and Dr. Torrance and Anthony Murray,
CSRs Senior Vice President, Audio and Consumer Business Unit, met at the International Consumer Electronics Show in Las Vegas and discussed potential synergies between Zoran and CSR in various areas.
During the week of January 10, 2011, Zoran opened its virtual data room to CSR so its representatives could commence their due
diligence investigation of Zoran. CSR also opened its virtual data room to Zoran so its representatives could commence their due diligence investigation of CSR. CSR and Zoran conducted an extensive due diligence investigation on each other until the
original merger agreement was executed on February 20, 2011.
On January 12, 2011, the Zoran board met with
management and Zorans legal and financial advisors. Goldman Sachs reviewed with the Zoran board a presentation of its preliminary financial analysis of Zorans remaining as an independent public company and its preliminary financial
analysis of various business combination alternatives. In addition, Goldman Sachs reported on the reactions of the potential large cap buyers it contacted between January 3, 2011 and January 11, 2011, and Goldman Sachs reviewed on a
preliminary basis eight potential strategic stock-for-stock merger partners, including CSR and the other potential strategic partner, and 14 potential large cap buyers. The Zoran board instructed Goldman Sachs to contact seven potential large cap
buyers (including the five previously contacted) to invite them to enter into a nondisclosure agreement with Zoran and to receive management presentations and to otherwise assess their interest. In addition, the Zoran board instructed Goldman Sachs
to conduct a detailed review of four potential strategic partners, including CSR and the other potential strategic partner.
Between January 13 and January 20, 2011, Goldman Sachs contacted seven potential large cap buyers to assess their interest in
acquiring Zoran. Five of the potential large cap buyers expressed no interest in acquiring the business. One large cap buyer expressed interest, but was focused only on acquiring Zoran for its engineers and refused to sign an NDA with a
non-solicitation provision. One large cap buyer requested a call to better understand the opportunity.
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On January 17, 2011, Dr. Gerzberg received a call from the Chief Executive Officer
of the potential strategic partner requesting to have a detailed discussion regarding the various Zoran businesses. The parties agreed that such discussion would take place if the companies moved forward with the potential deal and if Ramius
disengaged itself from Zoran.
On January 19, 2011, Messrs. van Beurden and Gardiner met certain members of the Zoran
board. The CSR team presented background information on CSR and the strategic rationale for the proposed merger.
On
January 20, 2011, the Zoran board met with management and its legal and financial advisors. Goldman Sachs conducted a detailed review of the four possible strategic partners. Goldman Sachs made a presentation of its preliminary financial
analysis of a combination of Zoran with each of the potential strategic partners. Goldman Sachs also updated the Zoran board on the status of discussions with potential large cap buyers. The Zoran board instructed its legal and financial advisors to
engage with the one large cap buyer that had expressed an interest in better understanding the opportunity.
On
January 21 and 22, 2011, Zoran hosted a two-day meeting in Palo Alto, California with a team of people from CSR. The two companies made presentations to each other regarding their respective businesses, and CSR conducted an extensive due
diligence investigation of Zoran. On January 29 and 30, 2011, CSR hosted a two-day meeting in London with a team of people from Zoran at which Zoran conducted an extensive due diligence investigation of CSR.
On January 26, 2011, counsel to CSR, Wilson Sonsini Goodrich & Rosati, delivered a draft of the original merger agreement
to counsel to Zoran. The draft agreement contemplated an all-stock transaction between Zoran and CSR.
On January 28,
2011, Zoran conducted a preliminary diligence call with a team from the potential large cap buyer.
On February 2, 2011,
Zorans board met with management and its legal and financial advisors. Dr. Gerzberg updated the Zoran board on the status of discussions with each of CSR, the other potential strategic partner and the potential large cap buyer that had
expressed an interest in pursuing discussions with Zoran. The Zoran board discussed each party and the synergies, advantages, challenges and disadvantages of a potential transaction with each party. The Zoran board determined to continue discussions
with CSR and the potential large cap buyer and cease discussions with the other potential strategic partner. Management then reviewed with the Zoran board its findings from the due diligence meetings with CSR. Goldman Sachs presented its preliminary
financial analysis on Zoran, led the Zoran board in a preliminary financial analysis of a proposed combination with CSR, and discussed CSRs past and projected financial performance estimates prepared by the management of Zoran. The projections
and related synergies estimates were based on Zoran managements internal estimates, which in the case of information about CSR were prepared based on publicly available information and Zoran managements familiarity with CSRs
business and markets. Management and the Zoran boards legal and financial advisors updated the Zoran board on the negotiations with CSR, including the current status of the draft merger agreement. The Zoran board instructed Dr. Gerzberg
and Goldman Sachs to negotiate a higher exchange ratio / pro forma ownership from CSR.
On February 4, 2011, a team from
the potential large cap buyer met in Palo Alto with Zorans management team to conduct further business and technical diligence of Zoran.
Over the weekend of February 5 and 6, 2011, Mr. van Beurden proposed to Dr. Gerzberg structuring the transaction with 25% to 35% of the consideration in the form of cash at the election of
Zorans stockholders. In addition, Dr. Gerzberg explained to Mr. van Beurden Zorans justification for seeking more than 35% of the combined companies.
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On February 8, 2011 Mr. van Beurden conveyed to Dr. Gerzberg that CSR would
not agree to more than 35% percent of the Combined Company going to Zorans security holders.
On February 8, 2011
the potential large cap buyer submitted an offer to buy Zoran at $14 per share or more, subject to further due diligence. Later that day, the Zoran board met with its legal and financial advisors to receive an update on discussions with CSR and a
comparison of the CSR offer with that of the potential large cap buyer.
On February 9, 2011, the potential large cap
buyer conducted follow-up due diligence with management of Zoran in Palo Alto. That same day, Dr. Gerzberg called Mr. van Beurden and informed him that Zoran had received an offer to acquire Zoran that equated to a value of $14 per share
or more.
On February 10, 2011, the potential large cap buyer formally withdrew its offer for Zoran citing a lack of
familiarity with the DTV space, and an inability to conduct and complete due diligence of Zorans DTV business in a timely manner, if at all. The potential large cap buyer also asked if Zoran would be interested in selling only its camera
business. Zoran indicated that it would seriously consider such a transaction only if the offer were a very attractive offer.
On February 10, 2011, Mr. van Beurden reiterated to Dr. Gerzberg that CSR would not agree to a transaction in which the
Zoran security holders received more than 35% of the Combined Company. He also explained that CSR would want to proceed for announcement of a transaction by February 21, 2011, London time.
Later that day, the Zoran board met with management and its legal and financial advisors. Dr. Gerzberg reviewed his separate
conversations with CSR and the potential large cap buyer since the last board meeting. Goldman Sachs presented an update on process with all large cap buyers and its preliminary financial analysis of Zoran, CSR and the pro forma Combined Company, as
well as a comparison of the CSR offer and potential transactions with large cap buyers. Jones Day updated the Zoran board on the negotiation of the draft merger agreement. The Zoran board instructed management, Goldman Sachs and Jones Day to
continue negotiations with CSR on the various open transaction issues, including the exchange ratio.
On February 11,
2011, Dr. Gerzberg called Mr. van Beurden and confirmed that following consideration of CSRs offer, Zoran would be willing to accept a proposal for structuring the transaction in which the Zoran security holders received 35% of the
Combined Company subject to the consideration being fully satisfied in shares.
On February 11, 2011, counsel to CSR
delivered a revised draft of the original merger agreement to counsel to Zoran. In this draft of the agreement, CSR proposed a mechanism whereby the merger consideration might combine cash and CSR ordinary shares, with a to-be-agreed-upon cap on the
maximum cash consideration Zorans stockholders could elect to receive, and rejected Zorans proposal that Zoran be permitted to terminate the merger agreement to accept a superior transaction.
On February 13, 2011, counsel to Zoran and counsel to CSR discussed open issues on the draft of the original merger agreement.
On February 16, 2011, the Zoran board met with management and its legal and financial advisors to discuss the status of
the proposed transaction with CSR. Goldman Sachs reviewed the proposed terms of the transaction and presented a comparison between an all-stock deal and a fixed cash/stock deal. Goldman Sachs then led the Zoran board through a review of its
preliminary financial analysis of the proposed transaction with CSR. Jones Day presented a summary of the current draft of the original merger agreement and reported that the parties had resolved a number of the issues relating to the original
merger agreement other than those related to Zorans ability to terminate to accept a superior transaction.
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Between February 16, 2011 and February 20, 2011, legal counsel to Zoran and CSR
continued to negotiate and exchange drafts of the original merger agreement and disclosure schedules. Through ongoing discussions between the principals and the parties respective legal and financial advisors, the parties determined to
undertake an all-stock transaction, with CSR implementing a stock buyback, Zorans board having the ability to terminate the merger agreement to accept a superior cash transaction at a higher termination fee of approximately 3% of the
transaction value, and CSRs Board having the ability to terminate the merger agreement to accept a superior transaction as long as it paid the 1% termination fee.
On the morning of February 20, 2011, Zorans board held a meeting to further consider the business combination with CSR. Representatives of Zorans management, Goldman Sachs and Jones Day
were present. A representative of Jones Day again reviewed with the Zoran board its fiduciary duties in the context of the proposed transaction, and described the terms and conditions of the original merger agreement. Goldman Sachs made a
presentation to the Zoran board with respect to process with various large cap buyers and its financial analysis of the exchange ratio and rendered to Zorans board an oral opinion, which was confirmed by delivery of a written opinion dated
February 20, 2011, to the effect that, as of that date and based on and subject to the factors and assumptions set forth in the opinion, the exchange ratio to be paid in the merger to holders (other than CSR and its affiliates) of Zorans
common stock was fair, from a financial point of view, to such holders. Management then delivered its final report with respect to its due diligence investigation of CSR and reviewed with the Zoran board managements views regarding the risks
of continuing as an independent public company and the rationale for entering into the proposed transaction with CSR. A representative of Jones Day reviewed with the Zoran board the proposed resolutions to be adopted by the Zoran board in connection
with the proposed merger agreement, and following discussion, the Zoran board unanimously approved and declared advisable the merger and the original merger agreement as being in the best interests of Zoran and its stockholders, authorized the
execution and delivery of the original merger agreement and recommended that the stockholders of Zoran adopt the original merger agreement. On the afternoon of February 20, 2011, Zoran and CSR executed the original merger agreement.
On February 21, 2011, London time, Zoran and CSR issued a joint press release announcing the transaction and the execution of the
original merger agreement.
On March 3, 2011, the Ramius Group delivered the requisite consents to remove Chairman Uzia
Galil and board members James D. Meindl and Philip M. Young, who were the three longest-serving members, from the Zoran board, and to elect Jon S. Castor, Dale Fuller and Jeffrey C. Smith as independent directors to the Zoran board.
Between the time the original merger agreement was signed and early May 2011, several events occurred that affected Zorans business
and results of operations, including the following:
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the March 2011 earthquake and related natural disaster and nuclear accident in Japan, which resulted in shortages of materials or components required
for the manufacturing of some Zoran products, and cautious order patterns, including delays and cancellations, from some Zoran customers due to their inability to obtain adequate supplies of materials or components from other suppliers that were
needed for the manufacture of the Zoran customers products, and the weakening of consumer demand in Japan;
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Cisco Systems, Inc., a major customer of Zorans COACH digital camera processor, announced on April 12, 2011 that it would exit from its Flip
consumer video camcorder segment;
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certain expected design wins with new customers were not realized by Zoran, and certain Zoran customers had not realized design wins for products that
were expected to include Zoran components;
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continued economic weakness resulting in consumer demand being below expectations in many of Zorans markets; and
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certain businesses of Zoran did not perform at the level previously expected by Zorans management.
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At a meeting of the Zoran board on April 21, 2011, the board discussed the impact of
these factors on Zorans business. The board also discussed Zorans financial results for the quarter ended March 31, 2011, and several members of management made presentations to the Board summarizing positive and negative
developments in Zorans business units or functional areas, as well as business outlook and new products. The board discussed that it would be prudent, in light of recent developments, to develop a revised scenario for Zorans operating
plan to show what Zoran would look like as a stand-alone entity, which Zoran could consider implementing if Zoran and CSR concurred. The Board directed management to deliver to the Board by May 3, 2011 a revised scenario that would result in
Zoran breaking even (excluding restructuring costs) at a targeted $100 million quarterly revenue run rate in the third fiscal quarter of 2011 and achieving profitability at quarterly run rates above that level and to highlight any strategic issues
that might arise if this planning scenario, which was not a forecast of future revenue, were actually implemented.
Both
before and after the April 21, 2011 Zoran board meeting, members of Zorans management indicated to CSRs management that Zorans management was reviewing the impact of recent unforeseen events that had the potential to affect
Zorans outlook.
On April 25, 2011, during a telephone call, Dr. Gerzberg reported to Mr. van Beurden on Zorans
prevailing assessment of the outlook for the second fiscal quarter of 2011. On April 27, 2011, members of Zorans management held meetings with members of CSRs management summarizing the ongoing review of Zorans business.
At a meeting of the Zoran board on May 3, 2011, management reviewed Zorans financial results for the current
quarter to date, and presented a scenario that included detailed expense reduction measures and targeted achieving breakeven on a $100 million quarterly revenue run rate in the third fiscal quarter of 2011.
On May 3, 2011, Zorans management provided the revised scenario presentation materials to CSRs management, suggesting
that Zoran was prepared to move forward with the revised scenario if CSR believed it made sense to do so.
Over the next
several days, Zorans and CSRs respective management and their respective financial advisors continued to discuss the developments in Zorans business as well as the revised scenario. Zorans management advised CSRs
management of the substance of Zorans planned May 9, 2011 announcement.
On May 9, 2011, Zoran issued a press
release announcing its results for the quarter ended March 31, 2011, including a GAAP and a non-GAAP net loss per share that compared unfavorably with the estimates that it had publicly announced previously. Zoran stated that it expected
Ciscos decision to exit its Flip consumer video camcorder segment would negatively impact Zorans digital camera revenues in the second quarter and remainder of 2011. Zoran also stated that during the second quarter of 2011, due to the
tragedy in Japan that occurred in the first quarter of 2011, Zoran was seeing cautious order patterns from customers across all of its core markets. Zoran also provided guidance for its revenue, gross margin, GAAP net loss per share and non-GAAP net
loss per share for the second quarter of 2011, which compared unfavorably to investment analysts estimates of the relevant metrics.
On May 9, 2011, CSR published a regulatory announcement noting Zorans latest guidance and that CSR was evaluating the implications of Zorans disclosures. The announcement also noted that
feedback from CSRs customers since the February 21st announcement of the proposed merger supported the strategic rationale for the proposed transaction.
Following Zorans issuance of its May 9
press release regarding Zorans earnings announcement and guidance, Zorans management noted a number of
published reports stating that certain major CSR shareholders appeared to be unfavorably disposed toward the all-stock consideration to be paid to Zoran stockholders under the terms of the original merger agreement. In addition, during this period,
CSR, through its management and
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advisors, communicated to Zoran that a number of shareholders of CSR had expressed the view that, in light of recent developments affecting Zoran, they were not inclined to vote in favor of the
transaction, and that management of CSR believed that enough shareholders held similar views such that there was a substantial possibility the transaction would not be approved. At a meeting of the Zoran board on May 10, 2011, the board
discussed the implications of the CSR press release and subsequent market reaction for the proposed transaction. Goldman Sachs made a presentation of the movement of the prices of CSR and Zoran stock over the previous twelve months and since the
announcement of the original merger agreement on February 20, 2011, and discussed the evolving spread between the deal price and Zorans stock price. Goldman Sachs also noted recent Wall Street research analyst reactions to Zorans
quarterly earnings release suggesting that research analysts anticipated a possible revision of the deal terms. The Zoran board discussed whether there might be other potential buyers for Zoran at an attractive price in the event the transaction
with CSR was not concluded. Goldman Sachs advised that, in compliance with the merger agreement, it had not been in contact with other potential parties since the announcement of the pending transaction, but that in light of the feedback received
from various potentially interested parties contacted during the market check conducted prior to the announcement of the original merger agreement, it was unlikely that other potential buyers would now present themselves, and noted that none had
presented themselves, expressing interest for either the whole company or any of the individual segments, since the announcement of the original merger agreement notwithstanding Zorans ability to entertain unsolicited offers under the terms of
the original merger agreement. The Zoran board also discussed the possibility of selling Zoran in pieces and requested that management and Goldman Sachs develop a sum-of-the-parts analysis to present to the board.
On May 12 and 13, 2011, members of Zorans management met with members of CSRs management at Zorans offices in
Sunnyvale, California in order to provide CSR with a detailed understanding of Zorans financial and operational condition.
At a meeting of the Zoran board on May 20, 2011, the board discussed strategies for maximizing the value of Zoran to stockholders, either as a standalone business or by breaking Zoran into separate
business units, in the event the pending transaction with CSR could not be concluded. Goldman Sachs led the board in a review of its preliminary and illustrative analysis of Zoran and its business units, based on financial information provided by
Zorans management. Goldman Sachs made a presentation of illustrative whole company and standalone segment profit and loss statements, based on financial information provided by Zorans management, and compared them to selected public
companies with comparable businesses. Based on this information, Goldman Sachs presented a preliminary and illustrative, multiples-based sum-of-the-parts analysis of the various segments and Zoran as a whole. Goldman Sachs also discussed potential
strategic alternatives available to CSR if a deal with Zoran were not completed.
On May 23, 2011, management of CSR
informed management of Zoran that in the view of CSRs board, recent developments at Zoran had negatively impacted the business and financial case for the merger, and offered to meet with Zorans management to more fully explain this view.
On May 26, 2011, management of CSR and Zoran met at Zorans offices in Sunnyvale, California along with
representatives of Goldman Sachs and JPMorgan. At the meeting the management teams discussed operating performance and other developments at both companies since they had entered into the original merger agreement on February 20, 2011.
Management of CSR presented its view of Zorans outlook based upon its evaluation and that of its advisors over the prior several weeks. That view anticipated reduced revenues, gross margins and growth rates as compared with CSRs prior
view. Management of CSR also indicated that CSR was in the midst of updating its own plan, which was to be presented to its board in June, and answered questions from Zorans management concerning CSRs outlook.
On May 27, 2011, representatives of JPMorgan and Goldman Sachs held a telephonic meeting. JPMorgan communicated that while
CSRs management believed that the strategic rationale for the merger remained attractive, CSR would like to consider a different structure including a significant cash component and reflecting
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a reduction in CSRs valuation of Zorans business. JPMorgan presented a preliminary proposal on behalf of CSRs management, which JPMorgan stated had not been approved by
CSRs board of directors, to restructure the merger consideration to be comprised of $6.00 in cash and an exchange ratio of 0.371 CSR ordinary shares per share of Zoran common stock, for a stated total per share consideration, as of that date,
of approximately $8.25. Also under this proposal, in view of the reduced pro forma ownership of the combined company by Zoran stockholders, Zoran would be afforded only one designee to the CSR board, who would be Dr. Gerzberg.
On May 29, 2011, the Zoran board met to consider CSRs preliminary proposal. Goldman Sachs made a presentation that showed that
the existing all-stock transaction had an implied value per share of Zoran common stock of $11.13, based on the most recent closing price for CSR stock, while the preliminary proposal presented by JPMorgan on May 27 had an implied value per
share of $8.23, or approximately a 26% discount to the existing transaction. The Zoran board discussed the preliminary proposal, expressed the view that it did not reflect the value of Zoran on a standalone basis, and directed management and
Zorans advisors to communicate to CSR that the preliminary offer was not close to being sufficient and that Zoran was prepared to enforce its rights under the original merger agreement. Following the meeting, Dr. Gerzberg communicated
this view to CSRs Chief Executive Officer, Mr. van Beurden.
On May 30, 2011, in a call between JPMorgan and
Goldman Sachs, Goldman Sachs indicated that the Zoran board had rejected the CSR proposal presented by JPMorgan on May 27 and, were CSR to amend its recommendation at any future date, Zoran was prepared to pursue its remedies under the original
merger agreement and that there was a binding agreement subject to Zorans termination right and collection of a termination fee in the event that CSRs board determined to change its recommendation to shareholders in respect of the
proposed transaction. Goldman Sachs stated that they and Zorans management would be willing to take back to Zorans board a revised offer at the value implied by the original merger agreement of approximately $11 per share, but with a
substantial cash component as opposed to the current all stock structure, and while that was not an offer from the Zoran board it was one that Zoran management and Goldman Sachs would be willing to take back to the Zoran board.
At a meeting of the Zoran board on June 2, 2011, Dr. Gerzberg informed the board that he had been informed by Mr. van
Beurden that CSR desired to announce a revised transaction by June 6, 2011. Dr. Gerzberg also related that Mr. van Beurden stated that, based on the view of shareholders of CSR, CSR would not be able to offer a proposal for a new
transaction that equaled the current value of the existing transaction. Mr. Stabenow reported that Ron Mackintosh, chairman of CSRs board of directors, had suggested the companies managements meet over the weekend of June 4-5,
2011 to conclude a revised transaction, and that if a revised transaction were not concluded by June 6, CSRs board of directors could be expected to withdraw its recommendation of the current transaction on June 6. The Zoran board
determined that it would be willing to have Zorans management meet with CSRs management over the weekend, subject to understanding CSRs disclosure obligations regarding a change in recommendation, and directed management and
Zorans advisors to communicate with CSR and its advisors in this regard.
On June 3, 2011, Mr. van Beurden
communicated to Dr. Gerzberg a revised offer consisting of $6.00 per share in cash, an exchange ratio of 0.371 CSR ordinary shares per share of Zoran common stock and a contingent value right (CVR) with a payout ranging between $0
and $1.50 per share depending on the stock price of the combined company on the second anniversary of the closing of the transaction. Mr. van Beurden stated that, in CSRs view, the value of the transaction, including the present value of
the CVR, was $9.20 per share of Zoran common stock, and reiterated that, based on the view of CSR shareholders, CSR would not propose a new transaction that equaled the current value of the existing transaction. Also on June 3, 2011,
Mr. van Beurden informed Dr. Gerzberg that the CSR board of directors was scheduled to meet on June 5, 2011.
At a meeting of the Zoran board on June 4, 2011, the board reviewed and discussed recent communications with CSR and CSRs
advisors, including a detailed review of revised terms of the transaction that CSR had informally proposed.
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Also on June 4, 2011, members of Zorans management and members of CSRs
management, with their respective financial advisors, held a telephonic meeting and discussed developments in CSRs business and its financial outlook.
At a meeting of the Zoran board on June 6, 2011, Zorans management gave an update on its four-year outlook for the various segments of Zorans business. Goldman Sachs gave a preliminary
financial analysis for Zoran and an analysis of the CVR, and also presented a preliminary and illustrative, multiples-based sum-of-the-parts analysis and a review of the proposed combination. Based on CSRs most recent stock price, the existing
transaction had an implied value of $10.20 per share, while the revised offer, excluding the value, if any, of the CVR, had an implied value of $8.05 per share, or approximately a 21.1% discount to the existing transaction. Goldman Sachs also led
the board in a detailed review of matters affecting Zorans strategic position, including the revised offer presented by CSR, various preliminary and illustrative financial analyses on Zoran as a whole and of its individual segments, and
potential partners for Zorans business units and Zoran as a whole in the event the transaction with CSR were not to close. Goldman Sachs reminded the board that, in compliance with the merger agreement, it had not been in contact with other
potential parties since the announcement of the pending transaction. At the conclusion of the meeting, the board expressed that they would be prepared to approve an offer with an implied value of $9.71 and directed management and Goldman Sachs to
communicate a counteroffer to CSR consisting of $7.50 in cash and an exchange ratio of 0.4 CSR ordinary shares per share of Zoran common stock, for a total implied value of $9.71 based on the most recent closing prices of CSR ordinary shares.
Following the meeting, Dr. Gerzberg communicated the Zoran boards counteroffer to Mr. van Beurden, and Goldman Sachs communicated the courteroffer to JP Morgan.
At a meeting of the Zoran board on June 7, 2011, Dr. Gerzberg updated the board on recent discussions with CSR regarding
revised terms for the merger. Zorans legal counsel and financial advisor also updated the board on their respective discussions with CSRs advisors.
On June 8, 2011, Zoran and CSR executed a letter agreement whereby Zoran agreed to waive the requirement set forth in the original merger agreement that CSR give Zoran three business days prior
notice of its intent to withdraw, modify, qualify or amend its recommendation in respect of the merger, in order to facilitate the ongoing efforts of the parties to determine whether an alternative to the existing transaction was achievable.
On June 10, 2011, Mr. Van Beurden communicated a revised proposal from CSR to Dr. Gerzberg, reiterating that,
based on the view of CSRs management, CSR would not propose a new transaction that equaled the current value of the existing transaction, and JPMorgan related the same revised proposal to Goldman Sachs. The revised proposal had an implied
value of $9.00 per share, consisting of $6.00 in cash and an exchange ratio of 0.585 CSR ordinary shares. It was also communicated that this proposal was being submitted to CSRs board of directors and that CSRs managements
expectation was to be able to announce a revised transaction by the middle of the following week.
Later on June 10,
2011, the Zoran board met with its financial and legal advisors to discuss the revised CSR proposal. Goldman Sachs informed the board that the implied value of the proposal was $9.02 per share based on the prior days closing price of CSR
ordinary shares. Some members of the Zoran board expressed the view that this value did not sufficiently reflect Zorans current value, and that Zoran could obtain a higher price from the sale of its business units or as a standalone company,
and that as a consequence, a revised transaction would have to be based on a higher value. The Zoran board instructed Zorans management and Goldman Sachs to communicate these views to CSR and to reiterate to CSR that Zoran continued to support
the existing transaction. Following the meeting, Dr. Gerzberg communicated the Zoran boards views to Mr. van Beurden, and Goldman Sachs communicated the Zoran boards views to JP Morgan. JPMorgan communicated to Goldman Sachs
that CSRs management was unable to propose a new transaction that equaled the current value of the existing transaction.
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At a meeting on June 11, 2011, Goldman Sachs updated the Zoran board with
JPMorgans feedback. The Zoran board further discussed CSRs most recent offer of $9.02. It was noted that the implied value of the existing all-stock transaction, which had been adversely affected by a continuing decline in the value of
CSRs ordinary shares, currently stood at $9.42 per share. Members of the Zoran board exchanged views on the value that they would require for a revised offer from CSR to be acceptable. There were differing views among the members of the Zoran
board in this regard, although all of the members agreed that the current revised proposal was not acceptable.
Later on
June 11, 2011, Mr. van Beurden informed Dr. Gerzberg that CSR would increase its offer to a total value in cash and CSR stock of $9.25 per share of Zoran common stock. Mr. van Beurden did not state whether the increase from the
CSRs prior offer would be in the form of cash or CSR stock. Mr. van Beurden also stated that CSR would definitely not offer $9.42 in value, the current value of the existing transaction, in a revised transaction, reiterating that, based
on the view of CSR shareholders, they would not support such a valuation. Upon conclusion of the conversation, Mr. van Beurden acknowledged that Dr. Gerzberg would revert to his board with a proposal of $9.26.
Early in the morning on June 12, 2011, the Zoran board met to discuss the most recent offer from CSR. Three members of the board
were supportive of the financial terms of the offer but wanted to continue negotiations to ensure it was the best offer that could be obtained for Zoran stockholders. A majority of four members of the board was not prepared to approve the financial
terms of the offer at that time. The board instructed Dr. Gerzberg and Zorans advisors to make a counteroffer at $9.50.
After this board meeting Dr. Gerzberg conveyed Zorans counteroffer of $9.50 to Mr. van Beurden and the reasoning for it, noting that the difference between the two companies
positions was small. Mr. van Beurden reiterated that CSR would not propose a new transaction that equalled the current value of the existing transaction, but stated that he would convey Zorans position to the chairman of CSRs board
of directors. After this discussion, CSRs chairman called the chairman of the Zoran board and indicated that CSRs offer of $9.26 per share was its final and best offer. In a subsequent conversation that same day, Mr. van
Beurden relayed the same information to Dr. Gerzberg, and stated that the consideration could consist of either $6.00 in cash and $3.26 of CSR stock or $6.26 in cash and $3.00 of CSR stock, at Zorans election.
Later that same day, the Zoran board again met with Zoran management and its financial and legal advisors to consider CSRs
final and best offer. The various board members discussed in extensive detail their respective views of CSRs offer and whether to accept or reject it, with the understanding that if they rejected this offer, the CSR board would
likely withdraw its recommendation for the existing transaction. Messrs. Castor, Fuller and Smith expressed their belief that Zoran could be restructured and operated such that near-term performance would improve and Zoran could command a price
higher than $9.26 per share, or alternatively that some or all of Zorans lines of business could be sold with the aggregate value of the sum-of-the-parts exceeding $9.26 per share. Further, they expressed the belief that pursuing this course
of action would have more upside potential than downside risk as compared to CSRs offer of $9.26 per share, even after taking in to consideration the time value of money and the additional expenses that would be incurred in restructuring
Zorans business. Dr. Gerzberg and Messrs. Burgess, Owens and Stabenow expressed their belief that, while Zoran could be positioned to be sold later as a standalone company, the present value of a future sale price would likely not exceed
$9.26 per share, and that such a strategy could not be executed in the near term, entailed significant execution risk in the absence of the economies of scale and critical complementary technical capabilities that a business combination with CSR
presented, would present uncertainty to Zorans customers and employees, and would risk the loss of customers business. They also expressed the view that selling off Zoran piecemeal entailed significant separation costs resulting from the
loss of economies of scale and loss of critical technical synergies among Zorans business units, material transaction risks, additional delay, uncertainty for Zorans customers and employees, and the potential loss of customers
confidence and business and, even if executed, was not likely to result in aggregate consideration in excess of $9.26 per share. After an extensive discussion, the Zoran board determined, by a vote of four directors voting in favor and three
against, to accept CSRs latest
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revised proposal, opting for the alternative of $6.26 in cash consideration and $3.00 in CSR stock, and instructed Zorans management and financial and legal advisors to negotiate the best
deal possible on those terms.
Also on June 12, 2011, the CSR board met to further discuss developments and the ongoing
discussions between the parties. Following this discussion, the CSR board determined it to be in the best interests of its shareholders to withdraw its recommendation in respect of the transaction contemplated by the original merger agreement, in
light of the developments affecting Zorans business and results of operations. As a result, CSR notified Zoran that the CSR board had withdrawn its recommendation of the proposed merger with Zoran under the terms of the original merger
agreement.
From June 13 to June 16, 2011, legal counsel to CSR and Zoran negotiated the amended and restated merger
agreement.
On June 13, 2011, Zorans management, after consultation with representatives of Goldman Sachs,
determined that, because the stock component of the merger consideration offered by CSR on June 11, 2011 was intended to represent $3.00 in value based on the closing price for CSR ordinary shares and the USD/GBP exchange rate on that date, the
stock component of the price agreed to on June 12, 2011 should be 0.589 CSR ordinary shares. Goldman Sachs communicated this position to JPMorgan, and JPMorgan agreed to this exchange ratio.
On June 14, 2011, members of Zorans management and members of CSRs management, with their respective financial advisors,
held a telephonic meeting and discussed both companies financial outlooks.
At a meeting of the Zoran board on
June 15, 2011, the Zoran board considered and approved managements revised Annual Operating Plan, including managements four-year outlook for the business. The board approved the revised plan with four directors voting in favor, two
abstaining and one absent, and directed Goldman Sachs to use the revised plan in the financial analysis it would perform in connection with rendering its fairness opinion on the financial consideration paid in the proposed revised transaction. The
board also considered a presentation by Goldman Sachs summarizing the revised management plan, managements view of CSRs financial plan, and an overview of anticipated synergies, based on analysis provided by Zoran management, from the
proposed merger with CSR.
On the afternoon of June 16, 2011, the Zoran board met to further consider the revised deal
terms. Representatives of Zorans management, Goldman Sachs and Jones Day were present. A representative of Jones Day again reviewed with the Zoran board its fiduciary duties in the context of the proposed transaction, and described the terms
and conditions of the amended merger agreement. Goldman Sachs noted that, due to the continuing decline in the value of CSRs stock, the financial terms of the revised deal represented a 0.1% discount to the financial terms of the previously
agreed-upon transaction. Goldman Sachs made a presentation of its financial analysis of the merger consideration and rendered to the Zoran board an oral opinion, which was confirmed by delivery of a written opinion dated June 16, 2011, to the
effect that, as of that date and based on and subject to the factors and assumptions set forth in the opinion, the merger consideration to be paid by CSR for each share of Zoran common stock pursuant to the merger agreement was fair from a financial
point of view to the holders (other than CSR and its affiliates) of the outstanding shares of Zoran common stock. A representative of Jones Day reviewed with the Zoran board the proposed resolutions to be adopted by the Zoran board in connection
with the proposed merger agreement, provided an update on the current shareholder litigation related to the existing transaction. Following discussion, the Zoran board (with Messrs. Castor, Fuller and Smith voting against) approved and declared
advisable the merger and the amended merger agreement as being in the best interests of Zoran and its stockholders, authorized the execution and delivery of the amended merger agreement and recommended that the stockholders of Zoran adopt the
amended merger agreement.
On the evening of June 16, 2011, Zoran and CSR executed the amended merger agreement.
On June 17, 2011, Zoran and CSR issued a joint press release announcing the revised transaction and the execution of the
amended merger agreement.
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Recommendation of Zorans Board of Directors; Zorans Reasons for
the Merger
Zorans board of directors, by a majority vote, has approved and declared advisable and in the best
interests of Zoran and its stockholders the merger, the amended merger agreement and the transactions contemplated by the amended merger agreement. Accordingly, Zorans board recommends that Zoran stockholders vote FOR adoption and
approval of the amended merger agreement.
Dr. Gerzberg and Messrs. Burgess, Owens and Stabenow voted to approve the
amended merger agreement, while Messrs. Castor, Fuller and Smith voted against approving the amended merger agreement. All of the board members agreed that their ultimate goal was to maximize value for Zorans stockholders. The difference of
opinion among the board members related to judgments as to whether other strategic alternatives would generate greater value to stockholders than the proposed CSR transaction, specifically (1) restructuring of Zorans operations such that
in the near- to mid-term, Zoran could return to profitability and command a higher price than that offered by CSR, or (2) selling off part or all of Zorans lines of business. The majority of the directors believed, on balance, that the
cost, additional delay, execution risk and additional uncertainty related to executing either of those two strategies far outweighed their potential to generate more value than $9.26 per share on a present value basis. The minority of the directors
believed, on balance, that either of these alternatives would likely generate greater value than $9.26 per share on a present value basis. None of the directors believed that it was in the best interest of Zorans stockholders to continue to
pursue the original merger agreement or to insist that the original merger agreement be presented to Zorans stockholders and CSRs shareholders for a vote. In particular, the majority of the directors determined that a program of
divestitures would not be better than the proposed merger as a way for Zoran to realize long-term stockholder value, because of, among other factors, the highly specialized nature of research and development activities in the semiconductor industry,
the diseconomies of scale and other negative synergies that could result for Zoran or the divested businesses from divestitures and the lack of interest among potential buyers in acquiring business segments of Zoran, other than the large cap buyer
that had expressed an interest in potentially acquiring only Zorans camera business.
In addition to the foregoing, in
determining to approve the merger agreement, Zorans board considered a number of other factors, including the following:
Merger consideration.
Zorans board considered that the $6.26 in cash and the 0.589 CSR ordinary shares in the form of CSR
ADSs that Zoran stockholders will receive for each Zoran share if the merger is consummated on the terms of the amended merger agreement represented a value of $9.19 per share of Zoran common stock or a total consideration of approximately $484
million, as of market close on June 16, 2011. A majority of the Zoran board concluded that such consideration is likely to deliver greater value to Zoran stockholders than would be expected if Zoran remained independent. Zorans board also
considered that the implied offer price represented a premium of approximately 27.6% to the closing price of Zoran common stock of $7.20 on June 16, 2011. The board also considered the fact that the $9.19 value of the merger consideration as of
June 16, 2011, was virtually the same as the $9.20 value as of that date of the merger consideration under the original transaction.
Zorans board also considered that the cash to be received by Zorans stockholders in the merger under the terms of the amended merger agreement will provide liquidity and certainty of value
with respect to a substantial majority of the consideration to be received by Zorans stockholders and would not change if the price of CSR ordinary shares or CSR ADSs were to decrease. Zorans board further considered that the CSR
ordinary shares in the form of ADSs exchanged at a fixed exchange ratio will allow Zoran stockholders to benefit from any increase in the price of the CSR ADSs they receive and will provide them with certainty regarding the number of CSR ADSs they
will receive. Zorans board also considered that Zorans shareholders will be able to trade on Nasdaq the CSR ADSs that they receive as merger consideration. Zorans board further considered that while certain Zoran institutional
stockholders, such as U.S.-based index funds, might sell Zoran common stock or CSR ADSs received in the merger, these types of short-term sell-offs should not detrimentally affect the long-term value of the merger to Zoran stockholders.
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Business condition and prospects of Zoran.
Zorans board considered the changes
in Zorans business since it entered into the original merger agreement, including:
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the approximately 4% decrease in Zorans revenue from its 2011 annual operating plan that was expected to result from the loss of sales to Cisco
following its announced exit from its Flip consumer video camcorder segment;
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the disruption in Zorans business resulting from the March 2011 Tōhoku earthquake and related natural disaster and nuclear accident in
Japan, including shortages of materials or components required for the manufacturing of some Zoran products, cautious order patterns, including delays and cancellations, from some Zoran customers due to their inability to obtain adequate supplies of
materials or components from other suppliers that were needed for the manufacture of the Zoran customers products, and the weakening of consumer demand in Japan;
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that certain expected design wins with new customers had not been realized by Zoran, and certain Zoran customers had not realized design wins for
products that were expected to include Zoran components;
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that continued economic weakness was resulting in consumer demand being below expectations in many of Zorans markets; and
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that certain businesses of Zoran did not perform at the level previously expected by Zorans management.
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Review of Zorans prospects if it remained independent.
Zorans board considered Zorans financial condition,
results of operations and business and earnings prospects if it were to remain independent in light of various factors, including consolidation, increased competition and other developments occurring in the semiconductor industry. Zorans board
concluded that there were significant risks to remaining independent and that Zoran could best realize long-term stockholder value by providing for Zorans stockholders to receive cash consideration for a portion of their shares and, for the
remainder of their shares, an interest in a global semiconductor enterprise with greater scale, broader product offerings and a larger customer base. Some of the risks and uncertainties identified by Zorans board as associated with Zoran
continuing to operate on a stand-alone basis include:
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the competitive nature of the businesses in which Zoran operates, the fact that Zorans principal competitors are significantly larger companies
with substantially greater financial resources and research and development capabilities, and the fact that new competitors have entered Zorans markets within the past several years with viable product offerings;
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the continued investments in research and development that would be required for Zoran to execute on its stand-alone operating plan on a go-forward
basis and the fact that, despite Zorans significant investments in research and development in the past, Zoran has not achieved commensurate revenue growth;
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Zorans historical inability to meet expectations in the DTV market, and the execution risks associated with Zorans product development
processes on a go-forward basis; and
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the current and cumulative effects of not realizing anticipated design wins with new customers, including the inability to realize anticipated revenue
and the effects on Zorans research and development efforts in an industry in which growth is reliant on continued research and development.
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Share price and business condition and prospects of CSR.
Zorans board considered the decrease in the market price of CSR ordinary shares, from 434 pence on February 18, 2011, the last
trading day before the announcement of the original merger agreement, to 308 pence on June 16, 2011, the last trading day before the announcement of the amended merger agreement. Zorans board also considered the potential impact on the
value of CSR ordinary shares of lowered projected sales of mobile handsets by Nokia Corporation, which is a major customer of CSR, as well as the disruption in the businesses of CSR and its suppliers and customers
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resulting from the Tōhoku earthquake and related natural disaster and nuclear accident. In the view of Zorans board, these factors made the all-stock consideration offered in the
transaction under the original merger agreement considerably less attractive than it had been when that agreement had been entered into. Management also reported to the board that certain Zoran shareholders had expressed a desire for cash
consideration.
CSR shareholder approval.
Zorans board considered that, based on Zorans managements
discussion with CSRs management and published reports concerning CSRs shareholders likely attitudes toward the original merger agreement (due to among other factors the changes in Zorans business and financial outlook since
the original merger agreement was entered into, the perceived dilutive effect on CSR of the issuance of CSR ordinary shares in consideration of Zoran common stock under the terms of the original merger agreement, and the withdrawal by CSRs
board of its recommendation of the proposed merger under the terms of the original merger agreement) there was a substantial possibility that CSRs shareholders would not vote to approve the transaction under the terms of the original merger
agreement. Zorans board also considered the potential adverse effects on Zoran and its business if the transaction were not approved at a general meeting of CSRs shareholders, including that Zoran would remain a stand-alone company with
prospects for entering into an advantageous business combination diminished by the rejection of the merger by CSRs shareholders. Zorans board further noted that Zorans common stock was trading at approximately a 20% discount to the
value of the merger consideration under the original merger agreement and that this arbitrage spread was an indication that investors substantially discounted the likelihood of the merger being consummated under the terms of the original
merger agreement.
Scale.
Zorans board believed that in order to become a more successful public company and a
more successful participant in the semiconductor consumer electronics market, Zoran needed to grow in scale. Zorans board believes that the Combined Company will benefit from, among other things, better utilization of its sales organization,
improved terms with vendors, a richer IP portfolio and the ability to share development costs across product ranges. In addition, Zorans board believes the Combined Company will be more diversified, thus more resilient than on a standalone
basis to the semiconductor industrys long product development and short sales cycles, price volatility and general cyclicality.
Potential development of next generation solutions.
Zorans board considered that Zorans and CSRs technology portfolios are complementary and will enable the Combined Company to
deliver advanced and connected platforms to capture and stream media-rich content. Zorans board considered the fact that the merger with CSR would provide Zoran with the potential to combine CSRs proven and market-accepted Bluetooth and
GPS technologies as well as capabilities in other technologies, including Wi-Fi, and Zorans proven and market-accepted camera, TV, STB and printer technologies.
In addition, Zorans board believed the merger will provide the opportunities to strengthen CSRs core business by adding imaging and video capabilities within its existing end markets and to
increase market share within global consumer markets such as Internet-enabled, location-aware digital cameras and next generation home entertainment products and peripherals. Zorans board further believed that the Combined Company will provide
a step change in CSRs total scale and addressable market, creating a top ten (in terms of revenues) fabless semiconductor company and accelerating the Combined Companys strategic shift into higher margin platforms and integrated
solutions.
Potential cost synergies.
Zorans board considered that a combination of CSR and Zoran is expected to
deliver significant cost saving synergies from reduced costs of sales (from improved vendor terms), the elimination of duplicated functions and reduced R&D, sales and marketing, and overhead costs. Zorans board also considered that the
transaction is expected to generate run rate cost synergies of $50 million and $20 million of additional cost reductions identified during integration planning by the end of the first quarter of 2012. Zorans board further considered that the
Combined Company is expected by CSR to deliver greater than 15% EPS accretion in 2012 before any incremental revenue synergies or one-off costs, after taking into account the ongoing cost savings at Zoran, the expected run rate cost synergies and
the additional cost reductions identified during due diligence.
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Potential for greater market opportunities and revenue synergies.
Zorans board
considered that the Combined Company will be well-positioned to capitalize on the large and growing market opportunities for each of Zorans and CSRs product offerings. Zorans board also considered that Zoran and CSR expect to
achieve additional revenue synergies through a combination of cross-selling opportunities due to each partys status as a qualified supplier to certain customers with whom the other party does not have a relationship, increased sales to
existing customers resulting from the combined companies broader product portfolio, new product offerings combining complementary technologies and access to new markets.
Financial strength and flexibility.
Zorans board considered that the Combined Company is expected to have a strong balance sheet and cash position because, at the end of fiscal year 2010, the
Combined Company on a pro forma basis had approximately $620 million (before the deduction of transaction fees) in cash, cash equivalents, treasury deposits and investments and no material indebtedness. However, the merger consideration contains a
significant cash component that will reduce the Combined Companys cash position upon the closing of the merger.
Consideration of alternative transactions; absence of alternative proposals.
Zorans board considered the expression of
interest received from one other potential strategic partner and the fact that the party ultimately did not propose a transaction. Zorans board further considered that Zoran had contacted eight potential strategic stock-for-stock merger
partners and 14 potential cash buyers, that this process resulted in only the indication of interest from the cash buyer that did not materialize into an attractive proposal and that, after the original merger agreement was announced, no other
prospective partners or buyers contacted Zoran expressing an interest in acquiring Zoran.
Complementary business and
management teams.
Zorans board considered the complementary nature of Zorans and CSRs respective businesses and demonstrated demand for next generation solutions based on a combination of their respective technologies.
Zorans board noted that the complementary businesses of Zoran with CSR would be a driving force for integration, and that the management teams of each of Zoran and CSR demonstrated a mutual commitment to select best-in-class talent from each
organization to effect the integration of the Combined Company.
Opinion of Zorans financial advisor.
Zorans board considered the financial presentations made by Goldman Sachs, and the opinion of Goldman Sachs, dated June 16, 2011, that, as of such date and based on and subject to the factors and assumptions set forth in the opinion,
the merger consideration to be paid by CSR for each share of Zoran common stock pursuant to the merger agreement was fair from a financial point of view to the holders (other than CSR and its affiliates) of the outstanding shares of Zoran common
stock. The full text of Goldman Sachs written opinion is attached to this proxy statement/prospectus as Appendix B. See The MergerOpinion of Zorans Financial Advisor.
Terms of the amended merger agreement.
Zorans board considered the terms of the amended merger agreement, including the
parties respective representations, warranties and covenants, the conditions to their respective obligations to complete the merger and the ability of the respective parties to terminate the agreement. Zorans board noted that the
termination or breakup fee provisions of the amended merger agreement could have the effect of discouraging alternative proposals for a business combination involving Zoran but that such provisions are customary for transactions of this
size and type. Zorans board also considered that the amount of the termination fee was within a reasonable range. Zorans board also noted that the amended merger agreement permits Zoran and Zorans board to respond to a bona fide
acquisition proposal that Zorans board determines could reasonably be expected to lead to a superior takeover proposal, subject to certain restrictions imposed by the amended merger agreement and the requirement that Zoran pay CSR the
termination fee in the event that Zoran terminates the amended merger agreement to enter into an alternative transaction with respect to a superior takeover proposal. Zorans board also noted that the amended merger agreement permits Zoran to
terminate the agreement to enter into an alternative transaction with respect to a superior takeover proposal involving any form of consideration, in contrast to the original merger agreement that permitted Zoran to so terminate the agreement with
respect only to a superior cash takeover proposal.
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Zorans board also considered a variety of other factors and risks concerning the
merger, including the following:
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that three directors voted against approving the amended merger agreement and the effect that might have on Zoran stockholders perception of the
transaction;
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that Mr. Smith is a principal at one of Zorans largest stockholders and the likelihood that if he voted against the amended merger agreement
as a director, it was likely that the fund he managed would also vote against the amended merger agreement as a stockholder, thus making it more difficult to obtain stockholder approval of the transaction;
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the current volatile state of the economy and general uncertainty surrounding forecasted economic conditions, both globally and within the
semiconductor industry, and the related impact on Zorans current share price and overall valuation, and the possibility that the Zorans long-term prospects as an independent company could improve in the event of a sustained economic
recovery;
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the information concerning Zorans and CSRs respective historic businesses, financial results and prospects, including the result of
Zorans due diligence review of CSR;
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the risk that the Combined Company might not achieve the expected benefits of the merger, growth or financial results anticipated, or otherwise fail to
deliver greater value to Zoran stockholders than they would have received had Zoran remained independent;
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that the gains on the merger consideration under the amended merger agreement would be taxable to stockholders for U.S. federal income tax purposes;
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that, because a substantial majority of the consideration payable to Zoran stockholders in the merger under the amended merger agreement will be cash,
Zoran stockholders will be able to participate only to a limited extent in any future earnings growth or increase in value of Zoran following the merger, and the possibility that the portion of a Zoran stockholders common stock that is
exchanged for cash in the merger might have increased in the future to a price greater than $6.26 per share;
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the challenges and costs inherent in integrating the two businesses and the time and effort that will be required from employees of both companies to
successfully complete that integration;
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the possibility that cost synergies may not be realized as a result of the merger, or that they may be lower than expected;
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the potential loss of customers, suppliers and employees of the Combined Company following the merger or of either party during the pre-closing period;
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the possibility that the merger may not be completed, including due to CSRs or Zorans shareholders failing to approve the transactions
contemplated by the amended merger agreement, and the potential adverse consequences to Zoran if the merger is not completed, including the potential to depress values offered by others to Zoran in a business combination and to erode customer and
employee confidence in Zoran;
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the risks associated with a fixed exchange ratio provided for in respect of the merger consideration payable in CSR ADSs, which by its nature will not
compensate Zoran stockholders for any declines in the price of CSR ordinary shares in respect of the portion of the merger consideration payable in CSR ADSs prior to the completion of the merger, and the absence of any termination right in the
amended merger agreement that would be triggered by a decrease in CSRs stock price (or the corresponding decrease in the value of the merger consideration to be received by Zoran stockholders);
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the effects of the merger in the short term, and the potential resulting sales of CSR ADSs by some Zoran stockholders, on the market price of CSR
ordinary shares and ADSs;
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the limitations imposed in the amended merger agreement on the conduct of Zorans business during the pre-closing period, its inability to solicit
and limited ability to respond to proposals for alternative transactions and the ability of its Board to change or withdraw its recommendation of the merger;
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-77-
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the limits, whether legal, contractual or otherwise, that may be placed on some stockholders with respect to the holding of shares in foreign private
issuer, such as CSR, and the impact that these limits may have on the trading price of CSR ADSs following the effective time of the merger; and
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the termination fee payable to CSR if the amended merger agreement is terminated under certain circumstances, and the potential effect that such
termination fee may have in deterring other potential acquirers from proposing an alternative transaction that would be more advantageous to Zoran stockholders.
|
In addition, in considering the merger, Zorans board was aware of and considered the interests that certain of its directors and
executive officers may have with respect to the merger that differ from, or are in addition to, their interests as Zoran stockholders generally, as described in The MergerInterests of Directors and Officers of Zoran in the Merger,
which Zorans board considered as being neutral in its evaluation of the proposed merger.
The foregoing discussion of
the information and factors considered by Zorans board is not intended to be exhaustive and includes only the material factors considered by Zorans board. In view of the wide variety of factors considered in connection with its
evaluation of the merger and the complexity of these matters, Zorans board did not find it useful to and did not attempt to quantify, rank or otherwise assign relative weights to these factors. In addition, Zorans board did not undertake
to make any specific determination as to whether any particular factor, or any aspect of any particular factor, was favorable or unfavorable to its ultimate determination, but rather Zorans board conducted an overall analysis of the factors
described above, including discussions with Zorans management and its financial and legal advisors. In considering the factors described above, individual members of Zorans board may have given different weights to different factors.
Opinion of Zorans Financial Advisor
Goldman Sachs rendered its opinion to Zorans board of directors that, as of June 16, 2011, and based upon and subject to the factors
and assumptions set forth therein, the $6.26 in cash (the Cash Consideration) and 0.14725 of a CSR ADS (the Stock Consideration, which is equivalent to 0.589 CSR ordinary shares and is referred to together with the Cash
Consideration as the Consideration) to be paid by CSR for each share of Zoran common stock pursuant to the merger agreement was fair from a financial point of view to the holders (other than CSR and its affiliates) of the outstanding
shares of Zoran common stock. The ratio of 0.589 CSR ordinary shares to one share of Zoran common stock is referred to as the exchange ratio in this section entitled Opinion of Zorans Financial Advisor.
The full text of the written opinion of Goldman Sachs, dated June 16, 2011, which sets forth assumptions made, procedures
followed, matters considered and limitations on the review undertaken in connection with the opinion, is attached to this proxy statement/prospectus as Appendix B. Goldman Sachs provided its opinion for the information and assistance of Zorans
board of directors in connection with its consideration of the transaction. The Goldman Sachs opinion is not a recommendation as to how any holder of Zoran common stock should vote with respect to the transaction, or any other matter.
In connection with rendering the opinion described above and performing its related financial analyses, Goldman Sachs
reviewed, among other things:
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the Agreement and Plan of Merger dated February 20, 2011;
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the Amended and Restated Agreement and Plan of Merger dated June 16, 2011;
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annual reports on Form 10-K of Zoran for the five years ended December 31, 2010; annual reports to shareholders of CSR for the five years ended
December 31, 2010 and the annual reports on Form 20-F of CSR for the years ended December 31, 2010 and January 1, 2010;
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the registration statement (No. 333-173590) on Form F-4 filed by CSR on April 19, 2011;
|
-78-
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|
certain interim reports to stockholders and Quarterly Reports on Form 10-Q of Zoran and Form 6-K of CSR;
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|
certain publicly available research analyst reports for Zoran and CSR;
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certain other communications from Zoran and CSR to their respective stockholders;
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|
the most recent internal financial analyses and forecasts for Zoran and CSR prepared solely by Zorans management, as approved for Goldman
Sachs use by Zoran, which are referred to below as the Revised Forecasts; and
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the most recent revenue, cost of goods sold and operating expense synergies projected solely by the management of Zoran to result from the transaction,
as approved for Goldman Sachs use by Zoran, which are referred to below as the Revised Synergies.
|
Goldman Sachs also held discussions with members of the senior managements of Zoran and CSR regarding their assessment of the strategic rationale for, and the potential benefits of, the transaction and
the past and current business operations, financial condition, and future prospects of their respective companies. In addition, Goldman Sachs reviewed the reported price and trading activity for Zoran common stock and for CSR ordinary shares,
compared certain financial and stock market information for Zoran and CSR with similar information for certain other companies the securities of which are publicly traded, reviewed the financial terms of certain recent business combinations in the
semiconductor industry and performed such other studies and analyses, and considered such other factors, as it deemed appropriate.
For purposes of rendering the opinion described above, Goldman Sachs relied upon and assumed, without assuming any responsibility for independent verification, the accuracy and completeness of all of the
financial, legal, regulatory, accounting, tax and other information provided to, discussed with or reviewed by it and it does not assume any responsibility for any such information. In that regard, Goldman Sachs has assumed that the Revised
Forecasts and the Revised Synergies have been reasonably prepared by the management of Zoran on a basis reflecting the best then available estimates and judgments of the management of Zoran. In addition, Goldman Sachs did not make an independent
evaluation or appraisal of the assets and liabilities (including any contingent, derivative or other off-balance-sheet assets and liabilities) of Zoran or CSR or any of their respective subsidiaries, nor was any evaluation or appraisal of the assets
or liabilities of Zoran or CSR or any of their respective subsidiaries furnished to Goldman Sachs. Goldman Sachs has also assumed that all governmental, regulatory or other consents and approvals necessary for the consummation of the transaction
will be obtained without any adverse effect on Zoran or CSR or on the expected benefits of the transaction in any way meaningful to its analysis. Goldman Sachs has also assumed that the transaction will be consummated on the terms set forth in the
merger agreement, without the waiver or modification of any term or condition the effect of which would be in any way meaningful to its analysis.
Goldman Sachs opinion does not address the underlying business decision of Zoran to engage in the transaction or the relative merits of the transaction as compared to any strategic alternatives that
may be available to Zoran; nor does it address any legal, regulatory, tax or accounting matters. Goldman Sachs opinion addresses only the fairness from a financial point of view to the holders (other than CSR and its affiliates) of shares of
Zoran common stock, as of the date of the opinion, of the Consideration pursuant to the merger agreement. Goldman Sachs opinion does not express any view on, and does not address, any other term or aspect of the merger agreement or the
transaction or any other term or aspect of any other agreement or instrument contemplated by the merger agreement or entered into or amended in connection with the transaction, including, without limitation, the fairness of the transaction to, or
any other consideration received in connection therewith by, the holders of any other class of securities, creditors or other constituencies of Zoran; nor as to the fairness of the amount or nature of any compensation to be paid or payable to any of
the officers, directors or employees of Zoran, or class of such persons in connection with the transaction, whether relative to the Consideration pursuant to the merger agreement or otherwise. Goldman Sachs opinion was necessarily based on
economic, monetary,
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market and other conditions as in effect on, and the information made available to it as of, the date of the opinion and Goldman Sachs assumed no responsibility for updating, revising or
reaffirming its opinion based on circumstances, developments or events occurring after the date of its opinion. In addition, Goldman Sachs does not express any opinion as to the prices at which the CSR ADSs or CSR ordinary shares will trade at any
time or as to the impact of the transaction on the solvency or viability of Zoran or CSR or the ability of Zoran or CSR to pay their respective obligations when they come due. Goldman Sachs opinion was approved by a fairness committee of
Goldman Sachs.
The following is a summary of the material financial analyses delivered by Goldman Sachs to the board of
directors of Zoran in connection with rendering the opinion described above. The following summary, however, does not purport to be a complete description of the financial analyses performed by Goldman Sachs, nor does the order of analyses described
represent relative importance or weight given to those analyses by Goldman Sachs. Some of the summaries of the financial analyses include information presented in tabular format. The tables must be read together with the full text of each summary
and are alone not a complete description of Goldman Sachs financial analyses. Except as otherwise noted, the following quantitative information, to the extent that it is based on market data, is based on market data as it existed on or before
June 14, 2011 and is not necessarily indicative of current market conditions.
Historical Stock Price Analysis
. Goldman
Sachs noted that based on the closing price of Zoran common stock of $7.82 per share on June 14, 2011, and the closing price of CSR ordinary shares of £3.161 (which Goldman Sachs converted into $5.18 at a GBP/USD exchange rate of 1.6373, which
was the spot exchange rate at 4:00 p.m. Eastern time (Nasdaq market close) on June 14 as reported by Bloomberg, which we refer to as the assumed exchange rate) on that date, the implied value of the exchange ratio pursuant to the merger
agreement of CSR ADSs representing 0.589 CSR ordinary shares was $3.05, and together with $6.26 to be paid in cash, the implied value of the consideration to be paid for each share of Zoran common stock was $9.31, which is referred to as the
implied per-share value. In addition, Goldman Sachs analyzed the implied per-share value to be paid to holders of Zoran common stock pursuant to the merger agreement in relation to the closing price of Zoran common stock on June 13 and
14, 2011 and the average closing prices of Zoran common stock for the 5-trading day and 20-trading day periods ended June 14, 2011 to calculate the implied premium of the implied per-share value to the respective historical prices per share of Zoran
common stock. The following table presents the results of these calculations:
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|
Historical Date or Period
|
|
Closing Price or Average
Trading Price of Zoran
Common
Stock
|
|
|
Implied Premium of
Implied Per-Share Value
to Price of
Zoran
Common Stock
|
|
June 14, 2011
|
|
$
|
7.82
|
|
|
|
19.0
|
%
|
One day prior (June 13, 2011)
|
|
$
|
7.79
|
|
|
|
19.5
|
%
|
Five-trading day period ended June 14, 2011
|
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$
|
7.81
|
|
|
|
19.1
|
%
|
20-trading day period ended June 14, 2011
|
|
$
|
7.99
|
|
|
|
16.4
|
%
|
In addition to the above, Goldman Sachs also noted that based on the closing price of Zoran common stock of $7.20 per
share on June 16, 2011, and the closing price of CSR ordinary shares of £3.081 (which Goldman Sachs converted into $4.97 at a GBP/USD exchange rate of 1.6147, which was the spot exchange rate at 4:00 p.m. Eastern time (Nasdaq market
close) on June 16 as reported by Bloomberg) on that date, the implied value of the exchange ratio pursuant to the merger agreement of CSR ADSs representing 0.589 CSR ordinary shares was $2.93, and together with $6.26 to be paid in cash, the implied
value of the consideration to be paid for each share of Zoran common stock was $9.19, which is referred to as the implied per-share value as of June 16, 2011. In addition, Goldman Sachs analyzed the implied per-share value as of June 16,
2011, to be paid to holders of Zoran common stock pursuant to the merger agreement in relation to the closing price of Zoran common stock on June 16 and 15, 2011 and the average closing prices of Zoran common stock for the 5-trading day and
20-trading day periods ended June 16, 2011 to calculate the implied premium of the implied per-share value as of June 16,
-80-
2011, to the respective historical prices per share of Zoran common stock. The following table presents the results of these calculations:
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|
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|
|
|
Historical Date or Period
|
|
Closing Price or Average
Trading Price of Zoran
Common Stock
|
|
|
Implied Premium of
Implied Per-Share Value
as of June 16,
2011,
to Price of Zoran
Common Stock
|
|
June 16, 2011
|
|
$
|
7.20
|
|
|
|
27.6
|
%
|
One day prior (June 15, 2011)
|
|
$
|
7.45
|
|
|
|
23.4
|
%
|
Five-trading day period ended June 16, 2011
|
|
$
|
7.65
|
|
|
|
20.2
|
%
|
20-trading day period ended June 16, 2011
|
|
$
|
7.90
|
|
|
|
16.4
|
%
|
Selected Companies Analysis
. Goldman Sachs reviewed and compared certain financial information for
Zoran and CSR to corresponding financial information, ratios and public market multiples for the following publicly traded corporations in the semiconductor industry:
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OmniVision Technologies Inc.
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Trident Microsystems, Inc.
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(which are referred to as the primary selected companies) and
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Applied Micro Circuits Corporation
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Entropic Communications, Inc.
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STMicroelectronics N.V.
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(which are referred to as the secondary selected companies).
Goldman Sachs categorized the selected companies as primary or secondary on the basis of each companys product offerings for the digital TV, multimedia and connectivity sectors, as well as the
similarities between the end-markets served and business model utilized by Zoran and each company.
Although none of the
selected companies is directly comparable to Zoran or CSR, the companies included were chosen because they are publicly traded companies with operations that for purposes of analysis may be considered similar to certain operations of Zoran and CSR.
Goldman Sachs also calculated and compared various financial multiples and ratios based on information it obtained from SEC
filings, Institutional Brokers Estimate System (referred to as IBES) estimates, other Wall Street research and the Revised Forecasts. The multiples and ratios of Zoran were calculated using the Zoran closing price on June 14,
2011 and the multiples and ratios of CSR were calculated using the CSR closing price on June 14, 2011 (converted to USD using the assumed exchange rate). The multiples and ratios of Zoran were based on the Revised Forecasts and IBES estimates. The
multiples and ratios for each of the selected companies, including CSR, were based on IBES estimates and the most recent publicly available information. With respect to the selected companies, Goldman Sachs calculated:
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enterprise value, which is the market value of common equity plus book value of debt less cash, as a multiple of estimated calendar year 2011 revenues;
and
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-81-
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enterprise value as a multiple of estimated calendar year 2011 earnings before interest, taxes and depreciation and amortization, or EBITDA.
|
The results of these analyses are summarized as follows:
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|
Selected Companies
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Primary
|
|
|
Secondary*
|
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|
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|
|
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|
Enterprise value as a multiple of:
|
|
Range
|
|
Median
|
|
|
Range
|
|
|
Median
|
|
|
Zoran
|
|
|
CSR
|
|
CY2011E Revenue
|
|
0.2x - 1.6x
|
|
|
0.4x
|
|
|
|
0.6x - 2.9x
|
|
|
|
1.8x
|
|
|
|
0.4x
|
|
|
|
0.6x
|
|
CY2011E EBITDA
|
|
8.1x - 23.4x
|
|
|
11.2x
|
|
|
|
4.6x - 26.0x
|
|
|
|
6.7x
|
|
|
|
NM
|
|
|
|
5.3x
|
|
Goldman Sachs
also compared the selected companies estimated calendar year 2011 price/earnings ratios to the results for Zoran and CSR. The following table presents the results of this analysis:
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|
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|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
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|
|
Selected Companies
|
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|
|
|
|
|
|
|
|
Primary
|
|
|
Secondary*
|
|
|
|
|
|
|
|
Price/Earnings Ratio:
|
|
Range
|
|
Median
|
|
|
Range
|
|
|
Median
|
|
|
Zoran
|
|
|
CSR
|
|
CY2011E
|
|
11.5x - 31.2x
|
|
|
21.6x
|
|
|
|
10.0x - 21.9x
|
|
|
|
14.4x
|
|
|
|
NM
|
|
|
|
14.4x
|
|
Analysis at
Various Prices
. Assuming a price of $7.82 per share of Zoran common stock and a price of $5.18 per CSR ordinary share, which was the closing price for Zoran common stock on June 14, 2011 and the USD equivalent of the closing price for CSR
ordinary shares on June 14, 2011 (calculated using the assumed exchange rate), Goldman Sachs performed certain analyses, based on the Revised Forecasts and IBES estimates, using the implied per-share value of the consideration of $9.31 offered
pursuant to the merger agreement. Goldman Sachs calculated for Zoran the implied equity value, the implied enterprise value, the ratio of implied enterprise value to revenue, the ratio of implied enterprise value to EBITDA and the ratio of price to
earnings. The following table presents the results of Goldman Sachs analysis (dollar amounts in millions, except for price per share):
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Zoran
|
|
|
|
|
|
|
|
|
|
Closing Price on
June 14, 2011
|
|
|
Offer
|
|
|
|
|
|
|
|
Implied price per share (as of June 14, 2011)
|
|
|
$7.82
|
|
|
|
$9.31
|
|
|
|
|
|
|
|
|
|
Implied equity value
|
|
|
$ 403
|
|
|
|
$ 481
|
|
|
|
|
|
|
|
|
|
Implied enterprise value
|
|
|
$ 152
|
|
|
|
$ 229
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Closing Price on
June 14, 2011
|
|
|
Offer
|
|
|
|
|
|
|
|
|
|
Revised
Forecasts
|
|
|
IBES*
Estimates
|
|
|
Revised
Forecasts
|
|
|
IBES*
Estimates
|
|
|
Primary
Comps
|
|
|
Secondary
Comps
|
|
Implied enterprise value / revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CY2011E
|
|
|
0.4x
|
|
|
|
0.4x
|
|
|
|
0.6x
|
|
|
|
0.6x
|
|
|
|
0.4x
|
|
|
|
1.8x
|
|
CY2012E
|
|
|
0.4x
|
|
|
|
0.4x
|
|
|
|
0.5x
|
|
|
|
0.6x
|
|
|
|
0.3x
|
|
|
|
1.6x
|
|
Implied enterprise value / EBITDA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CY2011E
|
|
|
NM
|
|
|
|
NM
|
|
|
|
NM
|
|
|
|
NM
|
|
|
|
11.2x
|
|
|
|
6.7x
|
|
CY2012E
|
|
|
5.6x
|
|
|
|
5.8x
|
|
|
|
8.4x
|
|
|
|
8.8x
|
|
|
|
5.4x
|
|
|
|
6.3x
|
|
Price to earnings ratio
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CY2011E
|
|
|
NM
|
|
|
|
NM
|
|
|
|
NM
|
|
|
|
NM
|
|
|
|
21.6x
|
|
|
|
14.4x
|
|
CY2012E
|
|
|
32.3x
|
|
|
|
NM
|
|
|
|
38.5x
|
|
|
|
NM
|
|
|
|
11.2x
|
|
|
|
12.6x
|
|
*
|
IBES Estimates included only analysts who updated or confirmed their estimates since May 2011.
|
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Illustrative Discounted Cash Flow Analysis
. Goldman Sachs performed an illustrative
discounted cash flow analysis on Zoran and CSR using the Revised Forecasts for each of Zoran and CSR.
Zoran
. In
performing the illustrative discounted cash flow analysis, Goldman Sachs calculated indications of net present value of free cash flows for Zoran for the period from May 31, 2011 through December 31, 2011 and for the years 2012 through 2014 using
illustrative discount rates ranging from 12.0% to 14.0%, reflecting estimates of Zorans weighted average cost of capital. Goldman Sachs calculated implied prices per share of Zoran common stock using illustrative terminal values in the year
2015 based on perpetuity growth rates ranging from 1.5% to 3.5% to terminal year projected cash flow, which implied one-year forward EBITDA multiples of 3.9x to 5.9x. These illustrative terminal values were then discounted to calculate implied
indications of present values using illustrative discount rates ranging from 12.0% to 14.0%. This analysis resulted in a range of implied present values per share of Zoran common stock of $8.11 - $9.74 per share.
Goldman Sachs also performed a sensitivity analysis to illustrate the effect of different assumptions for changes in annual sales growth
and operating margin for Zoran for 2012 and beyond. The sensitivity adjustments to projected annual sales growth ranged from 3.0% to (3.0%) of incremental growth. The sensitivity adjustments to projected annual operating margin ranged from 3.0% to
(3.0%) of incremental operating margin. This analysis, assuming a 13.0% discount rate and a perpetuity growth rate of 2.5%, resulted in a range of illustrative implied present values of $6.56 to $11.31 per share of Zoran common stock.
Goldman Sachs also performed a sensitivity analysis to illustrate the effect of different tax rate assumptions for Zoran in the terminal
year. The tax rate assumptions used were 20% and 35%. This analysis, assuming a 13% discount rate and using illustrative terminal values in the year 2015 based on perpetuity growth rates ranging from 1.5% to 3.5% to terminal year projected cash
flow, resulted in a range of implied present values of $7.81 to $9.15 per share of Zoran common stock.
CSR
. Goldman
Sachs calculated indications of net present value of free cash flows for CSR for the period from May 31, 2011 through December 31, 2011 and for the years 2012 through 2014 using illustrative discount rates ranging from 13.0% to 15.0%, reflecting
estimates of CSRs weighted average cost of capital. Goldman Sachs calculated implied prices per CSR ordinary share using illustrative terminal values in the year 2015 based on perpetuity growth rates ranging from 1.5% to 3.5% to terminal year
projected cash flow, which implied one-year forward EBITDA multiples of 3.8x to 5.5x. These illustrative terminal values were then discounted to calculate implied indications of present values using illustrative discount rates ranging from 13.0% to
15.0%. This analysis resulted in a range of implied present values per CSR ordinary share of $4.80 - $5.90 per share.
Goldman
Sachs also performed a sensitivity analysis to illustrate the effect of different assumptions for changes in annual sales growth and operating margin for CSR for 2012 and beyond. The sensitivity adjustments to projected annual sales growth ranged
from 3.0% to (3.0%) of incremental growth. The sensitivity adjustments to projected annual operating margin ranged from 3.0% to (3.0%) of incremental operating margin. This analysis, assuming a 14.0% discount rate and a perpetuity growth rate of
2.5%, resulted in a range of illustrative implied present values of $4.10 to $6.61 per CSR ordinary share.
Pro Forma
Combined Company Discounted Cash Flow Analysis
. Goldman Sachs also performed an illustrative discounted cash flow analysis for the pro forma Combined Company to calculate indications of the implied value to be received by holders of Zoran common
stock, respectively taking into account all, 50% and none of the Revised Synergies.
In performing the illustrative discounted
cash flow analysis, Goldman Sachs calculated indications of net present value of free cash flows for the Combined Company for the period from May 31, 2011 through December 31, 2011 and for the years 2012 through 2014 using illustrative discount
rates ranging from 13.0% to 15.0%, reflecting estimates of the Combined Companys weighted average cost of capital. Goldman Sachs calculated implied prices per ordinary share of the Combined Company using illustrative terminal values in the
year 2015 based on perpetuity growth rates ranging from 1.5% to 3.5% to terminal year projected cash flow. These illustrative terminal values were then discounted to calculate implied indications of present values using
-83-
illustrative discount rates ranging from 13.0% to 15.0%. This analysis resulted in a range of implied present values per ordinary share of the Combined Company of $4.41 - $5.65 per share
excluding the Revised Synergies.
Goldman Sachs calculated indications of net present value of free cash flows for the Revised
Synergies for the period from May 31, 2011 through December 31, 2011 and the years 2012 through 2014 using illustrative discount rates ranging from 13.0% to 15.0%, reflecting estimates of the Combined Companys weighted average cost of capital.
Goldman Sachs then calculated implied prices per share of the Combined Company using illustrative terminal values in the year 2015 based on perpetuity growth rates ranging from 1.5% to 3.5% to terminal year projected cash flow. These illustrative
terminal values were then discounted to calculate implied indications of present value using illustrative discount rates ranging from 13.0% to 15.0%. This analysis, together with the range of implied present values per ordinary share of the Combined
Company excluding the Revised Synergies referenced above, resulted in a range of $6.76 - $8.87 per ordinary share of the Combined Company including the Revised Synergies.
Goldman Sachs then calculated indications of the implied value to be received by holders of Zoran common stock in the transaction assuming none, 50% and all of the Revised Synergies are achieved using
both the closing price of a CSR ordinary share on June 14, 2011 and the indication of net present value of the free cash flows for the Combined Company described above. Goldman Sachs added the Cash Consideration to (1) either (X) the closing price
of a CSR ordinary share on June 14, 2011, or (Y) an indication of the net present value of the free cash flows of the Combined Company excluding the Revised Synergies using an illustrative discount rate of 14% and an illustrative perpetuity growth
rate of 2.5%, which, in each case was multiplied by the exchange ratio pursuant to the merger agreement of 0.589, and (2) the product of (A) the percentage of the Revised Synergies achieved, and (B) an indication of the net present value of the free
cash flows for the Revised Synergies using an illustrative discount rate of 14% and an illustrative perpetuity growth rate of 2.0% multiplied by the exchange ratio pursuant to the merger agreement of 0.589. This analysis resulted in the range of
implied value to be received per share of Zoran common stock assuming none, 50% of and all of the Revised Synergies set forth in the table below:
|
|
|
|
|
|
|
|
|
|
|
Illustrative Per Share Value
Indications
|
|
|
|
Based on
Combined
Company DCF
Value
|
|
|
Based on CSR
Closing Price on
June 14, 2011
|
|
Illustrative Per Share Value Indications
|
|
$
|
9.16 - $10.71
|
|
|
$
|
9.31 - $10.86
|
|
Illustrative Revenue Multiples-Based Sensitivity Analysis of Segments
. Goldman Sachs calculated
indications of implied equity value and implied enterprise value of Zoran as well as an illustrative range of price per share of Zoran common stock based on a range of illustrative 2011 revenue multiples for each segment of Zorans business and
estimated 2011 revenues for each segment of Zorans business per the Revised Forecasts. The multiples and ratios for each of the selected companies, and the range of illustrative 2011 revenue multiples, were based on IBES estimates, other Wall
Street research and the most recent publicly available information. The financial information for the Zoran segments were based on the Revised Forecasts. The publicly traded corporations selected were the following:
DTV/Set-Top Box Segment
|
|
|
Trident Microsystems, Inc.
|
Broadband Receivers Segment
-84-
|
|
|
Entropic Communications, Inc.
|
Camera (Mobile) Segment
|
|
|
OmniVision Technologies Inc.
|
Printer/Imaging Segment
|
|
|
Applied Micro Circuits Corporation
|
|
|
|
Marvell Technology, Inc.
|
Although none of the selected companies is directly comparable to the applicable Zoran segment, the companies included were chosen because they are publicly traded companies with operations that for
purposes of analysis may be considered similar to certain operations of the applicable Zoran segment. The illustrative revenue multiples-based sensitivity analysis may not reflect the stand-alone value of the individual segments or of Zoran as a
whole. This analysis does not incorporate the value of any residual net operating losses that may be available after addressing any tax leakage resulting from a separation of the segments or section 382 limitations. In addition, this analysis does
not account for the salability of each segment.
The following table presents the results of Goldman Sachs analysis
(dollar amounts in millions, except for price per share):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011
Revenue
|
|
|
Illustrative 2011 Revenue
Multiple
|
|
|
Implied Enterprise Value
|
|
Segment
|
|
|
Low
|
|
|
High
|
|
|
Low
|
|
|
High
|
|
DTV
|
|
$
|
71
|
|
|
|
0.3x
|
|
|
|
0.6x
|
|
|
$
|
21
|
|
|
$
|
43
|
|
Set-Top Box
|
|
$
|
22
|
|
|
|
0.0x
|
|
|
|
0.0x
|
|
|
$
|
0
|
|
|
$
|
0
|
|
Broadband Receivers
|
|
$
|
68
|
|
|
|
0.4x
|
|
|
|
0.8x
|
|
|
$
|
27
|
|
|
$
|
54
|
|
Multimedia Products
|
|
$
|
32
|
|
|
|
0.0x
|
|
|
|
0.0x
|
|
|
$
|
0
|
|
|
$
|
0
|
|
Home Entertainment
|
|
$
|
193
|
|
|
|
|
|
|
|
|
|
|
$
|
49
|
|
|
$
|
97
|
|
Camera (Mobile)
|
|
$
|
131
|
|
|
|
0.6x
|
|
|
|
1.4x
|
|
|
$
|
79
|
|
|
$
|
183
|
|
Printer / Imaging
|
|
$
|
64
|
|
|
|
1.1x
|
|
|
|
2.1x
|
|
|
$
|
70
|
|
|
$
|
134
|
|
Total Implied Enterprise Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
198
|
|
|
$
|
415
|
|
Total Implied Equity Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
414
|
|
|
$
|
632
|
|
Illustrative Price per Zoran Share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
7.88
|
|
|
$
|
11.85
|
|
-85-
Selected Transactions Analysis
. Goldman Sachs analyzed certain information relating
to the following selected transactions in the semiconductor industry since June 2005:
|
|
|
AcquirorTarget
|
|
Date of Announcement
|
SkyworksAdvanced Analogic Tech
|
|
May 26, 2011
|
Texas InstrumentsNational Semiconductor
|
|
April 4, 2011
|
MediaTekRalink
|
|
March 16, 2011
|
Golden Gate CapitalConexant Systems
|
|
February 23, 2011
|
QualcommAtheros
|
|
January 5, 2011
|
MicrosemiActel
|
|
October 4, 2010
|
IntelMcAfee
|
|
August 19, 2010
|
IntersilTechwell
|
|
March 22, 2010
|
ON SemiconductorCalifornia Micro Devices
|
|
December 14, 2009
|
IntelWind River Systems
|
|
June 4, 2009
|
Integrated Device TechnologyTundra Semiconductor
|
|
April 30, 2009
|
CSRSiRF
|
|
February 9, 2009
|
ON SemiconductorCatalyst Semiconductor
|
|
July 17, 2008
|
TriquintWJ Communications
|
|
March 10, 2008
|
ON SemiconductorAMI Semiconductor
|
|
December 13, 2007
|
RF Micro DevicesSirenza Microdevices
|
|
August 13, 2007
|
Temasek HoldingsSTATS ChipPAC
|
|
March 1, 2007
|
LSI LogicAgere
|
|
December 4, 2006
|
Sponsor GroupFreescale
|
|
September 15, 2006
|
SanDiskM-Systems
|
|
July 31, 2006
|
AMDATI Technologies
|
|
July 24, 2006
|
MicronLexar Media
|
|
March 8, 2006
|
Integrated Device TechnologyIntegrated Circuit Systems
|
|
June 16, 2005
|
For each of the selected transactions, Goldman Sachs calculated and compared the aggregate consideration
as a multiple of next twelve months revenues, offer price as a multiple of next twelve months earnings and premiums paid in relation to the closing price per share of the target company one day prior to announcement and the average closing
prices for the five trading day and twenty trading day periods ended on the date prior to announcement. While none of the companies that participated in the selected transactions are directly comparable to Zoran, the companies that participated in
the selected transactions are companies with operations that, for the purposes of analysis, may be considered similar to certain of Zorans results, market size and product profile.
The following table presents the results of this analysis:
|
|
|
|
|
|
|
|
|
|
|
Selected Transactions
|
|
|
|
Range
|
|
|
Median
|
|
Consideration as a Multiple of:
|
|
|
|
|
|
|
|
|
NTM Revenues
|
|
|
0.1x - 5.8x
|
|
|
|
1.7x
|
|
NTM Earnings
|
|
|
13.9x - 41.7x
|
|
|
|
22.8x
|
|
Premium Over:
|
|
|
|
|
|
|
|
|
1-Day Prior
|
|
|
(4.8)% - 87.8%
|
|
|
|
30.3%
|
|
5 Trading Day Average
|
|
|
(3.1)% - 100.6%
|
|
|
|
30.1%
|
|
20 Trading Day Average
|
|
|
5.4% - 80.1%
|
|
|
|
33.8%
|
|
Pro Forma Merger Analysis
. Goldman Sachs prepared illustrative pro forma analyses of the potential
financial impact of the merger using the Revised Forecasts for Zoran and CSR both taking into account and excluding the Revised Synergies. For each of the years 2011 and 2012, Goldman Sachs compared the projected earnings per share of CSR ordinary
shares, in each case, on a standalone basis, to the projected earnings per share of the Combined Company on a pro forma basis. Goldman Sachs performed this analysis based on the closing
-86-
price of Zoran common stock and CSR ordinary shares on June 14, 2011. Based on such analyses, the proposed transaction would be dilutive to CSRs shareholders on an earnings per share basis
in both of the above scenarios in the year 2011 and excluding the Revised Synergies in year 2012, and the proposed transaction would be accretive to CSR shareholders on an earnings per share basis taking into account the Revised Synergies in the
year 2012.
Pro Forma Growth Analysis
. Goldman Sachs also calculated and compared certain historical and forecasted
financial information, including revenue growth, gross profit margin and operating profit margin through calendar year 2014, for each of Zoran and CSR on a stand-alone basis and for the Combined Company on a pro forma basis (both including and
excluding Revised Synergies). Goldman Sachs made these calculations and comparisons using the Revised Forecasts. The results of this analysis is set forth in the table below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined Company
|
|
|
|
Zoran
|
|
|
CSR
|
|
|
Excluding
Revised
Synergies
|
|
|
Including
Revised
Synergies
|
|
Revenue (2010 - 2014E Compound Annual Growth Rate)
|
|
|
4
|
%
|
|
|
6
|
%
|
|
|
5
|
%
|
|
|
7
|
%
|
Gross profit margin 2014E
|
|
|
52
|
%
|
|
|
51
|
%
|
|
|
51
|
%
|
|
|
53
|
%
|
Operating profit 2014E
|
|
|
11
|
%
|
|
|
13
|
%
|
|
|
12
|
%
|
|
|
17
|
%
|
Present Value of Future Share Price Analysis
. Goldman Sachs performed an illustrative analysis of
the implied present value of the future price per share of Zoran common stock on a stand-alone basis and on a pro forma basis for the Combined Company, both taking into account and excluding the Revised Synergies. This analysis is designed to
provide an indication of the present value of a theoretical future value of a companys equity as a function of the companys estimated future earnings and its assumed price to future earnings per share multiple. For this analysis, Goldman
Sachs used the Revised Forecasts for Zoran and the Combined Company on a pro forma basis for each of the calendar years 2012, 2013 and 2014. Goldman Sachs first calculated the implied values per share of Zoran common stock as of December 31 for each
of the calendar years 2011, 2012 and 2013, by applying illustrative price to forward earnings per share multiples of 10.0x to 18.0x to estimated earnings per share of Zoran common stock for each of the calendar years 2012, 2013 and 2014 for Zoran on
a stand-alone basis and to estimated earnings per pro forma share of the Combined Company (both taking into account and excluding the Revised Synergies) for each of the calendar years 2012, 2013 and 2014 for the Combined Company on a pro forma
basis. Goldman Sachs then discounted 2011, 2012 and 2013 values back to June 30, 2011, using an illustrative discount rate of 13.9% for Zoran on a stand-alone basis, reflecting an estimate of Zorans cost of equity and taking into account a
size premium, and 10.5% for the Combined Company on a pro forma basis, reflecting an estimate of CSRs cost of equity, and, in the case of the pro forma analysis of the Combined Company, multiplied the resulting value by the exchange ratio
pursuant to the merger agreement of 0.589 and added the resulting product to the Cash Consideration. This analysis resulted in a range of implied present values reflected in the table below:
|
|
|
|
|
|
|
Implied Present Value per Zoran Share
|
|
Zoran stand-alone basis
|
|
|
$2.27 - $12.05
|
|
Pro forma Combined Company basis (ex. Revised Synergies)
|
|
|
$8.49 - $12.29
|
|
Pro forma Combined Company basis (incl. Revised Synergies)
|
|
|
$9.49 - $15.16
|
|
The preparation of a fairness opinion is a complex process and is not necessarily susceptible to partial
analysis or summary description. Selecting portions of the analyses or of the summary set forth above, without considering the analyses as a whole, could create an incomplete view of the processes underlying Goldman Sachs opinion. In arriving
at its fairness determination, Goldman Sachs considered the results of all of its analyses and did not attribute any particular weight to any factor or analysis considered by it. Rather, Goldman Sachs made its determination as to fairness on the
basis of its experience and professional judgment after considering the results of all of its analyses. No company or transaction used in the above analyses as a comparison is directly comparable to Zoran or CSR, respectively, or the contemplated
transaction.
-87-
Goldman Sachs prepared these analyses for purposes of Goldman Sachs providing its
opinion to Zorans board of directors as to the fairness from a financial point of view of the consideration pursuant to the merger agreement. These analyses do not purport to be appraisals nor do they necessarily reflect the prices at which
businesses or securities actually may be sold. Analyses based upon forecasts of future results are not necessarily indicative of actual future results, which may be significantly more or less favorable than suggested by these analyses. Because these
analyses are inherently subject to uncertainty, being based upon numerous factors or events beyond the control of the parties or their respective advisors, none of Zoran, Goldman Sachs or any other person assumes responsibility if future results are
materially different from those forecast.
The consideration payable pursuant to the merger agreement was determined through
arms-length negotiations between Zoran and CSR and was approved by Zorans board of directors. Goldman Sachs provided advice to Zoran during these negotiations. Goldman Sachs did not, however, recommend any specific consideration to Zoran
or the Zoran board of directors or that any specific consideration constituted the only appropriate consideration for the transaction.
As described above, Goldman Sachs opinion to Zorans board of directors was one of many factors taken into consideration by Zorans board of directors in making its determination to
approve the merger agreement. The foregoing summary does not purport to be a complete description of the analyses performed by Goldman Sachs in connection with the fairness opinion and is qualified in its entirety by reference to the written opinion
of Goldman Sachs attached to this proxy statement/prospectus as Appendix B.
Goldman Sachs and its affiliates are engaged in
investment banking and financial advisory services, commercial banking, securities trading, investment management, principal investment, financial planning, benefits counseling, risk management, hedging, financing, brokerage activities and other
financial and non-financial activities and services for various persons and entities. In the ordinary course of these activities and services, Goldman Sachs and its affiliates may at any time make or hold long or short positions and investments, as
well as actively trade or effect transactions, in the equity, debt and other securities (or related derivative securities) and financial instruments (including bank loans and other obligations) of Zoran, CSR and any of their respective affiliates or
any currency or commodity that may be involved in the transaction for their own account and for the accounts of their customers. Goldman Sachs acted as financial advisor to Zoran in connection with, and participated in certain of the negotiations
leading to, the transaction contemplated by the merger agreement. Goldman Sachs may in the future provide investment banking services to Zoran, CSR and their respective affiliates, for which the Investment Banking Division of Goldman Sachs may
receive compensation.
The Zoran board of directors selected Goldman Sachs as its financial advisor because it is an
internationally recognized investment banking firm that has substantial experience in transactions similar to the transaction. Pursuant to a letter agreement dated December 15, 2010, Zoran engaged Goldman Sachs to act as its financial advisor in
connection with the contemplated transaction. Pursuant to the terms of this engagement letter, Zoran has agreed to pay Goldman Sachs a transaction fee of approximately $6.3 million, approximately $750,000 of which is offset by fees paid or payable
to Goldman Sachs for proxy advisory services and the remainder of which is payable upon consummation of the transaction. In addition, Zoran has agreed to reimburse Goldman Sachs for its expenses, including attorneys fees and disbursements, and
to indemnify Goldman Sachs and related persons against various liabilities, including certain liabilities under the federal securities laws.
Certain Financial Forecasts and Synergies Estimates
In performing their financial analysis for purposes of rendering the opinion described and summarized above in Opinion of
Zorans Financial Advisor, at the direction of Zorans management and board, Goldman Sachs used the Revised Forecasts for Zoran and CSR and Revised Synergies for the Combined Company. These forecasts and estimates were prepared by
Zorans management and presented to Zorans board. Neither Zoran nor any other person has made, or makes, any representation regarding these forecasts and estimates, which are set forth below.
-88-
Except for published quarterly guidance as to expected results for the next quarter, Zoran
does not as a matter of course make public projections as to revenue, EBITDA, net income, cost of sales, operating expenses or other financial information. Zorans management prepared the prospective financial information summarized below to
provide its board, financial advisors and CSR with financial forecasts and potential synergies estimates for the Combined Company. The accompanying prospective financial information was not prepared with a view toward public disclosure or with a
view toward complying with the guidelines established by the American Institute of Certified Public Accountants with respect to prospective financial information. In the view of Zorans management, however, such information was prepared on a
reasonable basis based on information available at the time the forecasts and estimates were prepared, and, to Zorans managements knowledge and belief at the time the forecasts and estimates were prepared, presented the expected course
of action and the potential future financial performance of Zoran and the Combined Company. However, this information is not fact and should not be relied upon as being indicative of future results, and readers of this proxy statement/prospectus are
cautioned not to place undue reliance on the prospective financial information, which has the potential to differ and could differ materially from actual performance and results.
Neither CSRs nor Zorans current, former, or any other independent auditors listed as experts in Experts, nor any
other independent accountants, have compiled, examined, or performed any procedures with respect to the prospective financial information contained herein, nor have they expressed any opinion or any other form of assurance on such information or its
achievability, and they assume no responsibility for, and disclaim any association with, the prospective financial information. The independent auditors reports incorporated by reference in this proxy statement/prospectus relate to historical
financial information. They do not extend to any prospective financial information and should not be seen to do so.
The
forecasts and synergies estimates were based on Zoran managements internal estimates, which in the case of information about CSR were prepared based on publicly available information and Zoran managements familiarity with CSRs
business and markets. The estimated synergies were based on potential revenue and cost savings synergies that Zorans management projected to result from the merger, including the potential for new product offerings combining complementary
technologies, access to and development of new markets, reduced cost of sales, reduced R&D costs and reduced sales, general and administrative costs. The inclusion of forecasts and synergy estimates in this proxy statement/prospectus should not
be regarded as an indication that Zoran or any other person that received this information considered, or now considers, this information to be a reliable prediction of the future results of CSR, Zoran or the Combined Company. Zoran prepared the
projections solely for its internal purposes, and to assist its financial advisors and CSR in their analyses. This information is not fact and should not be relied upon as being indicative of future results, and readers of this proxy
statement/prospectus are cautioned not to rely on the prospective financial information.
The following tables summarize the
Revised Forecasts and Revised Synergies used by Goldman Sachs in preparing the opinion described above:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Zoran Standalone Financial Forecast Information
|
|
|
|
2011
|
|
|
2012
|
|
|
2013
|
|
|
2014
|
|
|
|
U.S.$ in millions
|
|
Revenue
|
|
$
|
388
|
|
|
$
|
425
|
|
|
$
|
469
|
|
|
$
|
512
|
|
EBITDA
|
|
$
|
(15
|
)
|
|
$
|
27
|
|
|
$
|
46
|
|
|
$
|
63
|
|
Net (loss)/income
|
|
$
|
(30
|
)
|
|
$
|
12
|
|
|
$
|
31
|
|
|
$
|
47
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CSR Standalone Financial Forecast Information
|
|
|
|
2011
|
|
|
2012
|
|
|
2013
|
|
|
2014
|
|
|
|
U.S.$ in millions
|
|
Revenue
|
|
$
|
785
|
|
|
$
|
832
|
|
|
$
|
909
|
|
|
$
|
995
|
|
EBITDA
|
|
$
|
90
|
|
|
$
|
108
|
|
|
$
|
125
|
|
|
$
|
148
|
|
Net income
|
|
$
|
58
|
|
|
$
|
70
|
|
|
$
|
83
|
|
|
$
|
103
|
|
-89-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined Company Potential Synergies
|
|
|
|
2011
|
|
|
2012
|
|
|
2013
|
|
|
2014
|
|
|
|
U.S.$ in millions
|
|
Revenue
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
75
|
|
|
$
|
150
|
|
Cost of sales
|
|
$
|
3
|
|
|
$
|
15
|
|
|
$
|
16
|
|
|
$
|
18
|
|
Operating expense
|
|
$
|
3
|
|
|
$
|
35
|
|
|
$
|
35
|
|
|
$
|
35
|
|
In developing the Revised Forecasts and Revised Synergies, Zoran made numerous assumptions about its and
CSRs industries, markets and products, and their ability to execute on their respective business plans. In particular, Zoran made the following assumptions:
|
|
|
The global economic recovery would continue, resulting in increased revenue for both companies.
|
|
|
|
Neither company would make any significant acquisitions or divestitures.
|
|
|
|
Foreign exchange rates would be those in effect as of the date that the projections were prepared.
|
|
|
|
Zoran would realize increased operating margins as a result of its strategic initiatives to reduce operating expenses.
|
|
|
|
CSR would not incur any significant restructuring or impairment costs.
|
|
|
|
Neither companys gross margins would change significantly.
|
|
|
|
Zoran would incur non-recurring expenses related to the right-sizing of certain businesses.
|
|
|
|
Each company would increase its market share in certain segments and successfully expand in certain segments in certain geographic markets.
|
|
|
|
Zoran would right-size certain businesses.
|
|
|
|
On the basis of public information regarding certain of its major customers, each company would experience reduced sales from those customers.
|
|
|
|
Zoran would at least maintain market share in certain existing markets and lose share in others.
|
|
|
|
Increased demand would offset a decrease in each companys average selling prices in certain businesses.
|
|
|
|
Changes in CSRs sales mix would result in an increase in CSRs gross margins.
|
|
|
|
Changes in Zorans sales mix would result in an increase in average selling prices in certain segments.
|
|
|
|
Certain of CSRs markets would grow more slowly than forecast by industry studies.
|
In connection with the transaction provided for by the original merger agreement, in February 2011 Zorans management prepared and
provided to the Zoran board, Goldman Sachs and CSR certain financial forecast information and synergy estimates. This information was presented in two alternative cases. Compared to the forecast information and synergy estimates set forth above, the
previously prepared forecast information and estimates did not account for effects of:
|
|
|
the March 2011 earthquake and related natural disaster and nuclear accident in Japan, which resulted in shortages of materials or components required
for the manufacturing of some Zoran products and cautious order patterns, including delays and cancellations, from some Zoran customers due to their inability to obtain adequate supplies of materials or components from other suppliers that were
needed for the manufacture of the Zoran customers products, and the weakening of consumer demand in Japan;
|
|
|
|
an expected significant reduction in sales of Zorans COACH digital camera processor product as a result of the announcement by Cisco, a major
customer of Zoran, on April 12, 2011 that it would exit from its Flip consumer video camcorder segment;
|
-90-
|
|
|
expected design wins with new customers not being realized by Zoran, and certain Zoran customers not realizing design wins for products that were
expected to include Zoran components;
|
|
|
|
certain businesses of Zoran not performing at the level previously expected by Zorans management;
|
|
|
|
continued economic weakness resulting in consumer demand being below expectations in many of Zorans markets;
|
|
|
|
certain potential cost reductions identified by Zoran after the preparation of the previously prepared forecast information;
|
|
|
|
the incurrence by Zoran of non-recurring expenses related to the right-sizing of certain businesses;
|
|
|
|
each company experiencing reduced sales from certain of its major customers, on the basis of public information regarding those customers; and
|
|
|
|
changes in CSRs sales mix resulting in an increase in CSRs gross margins.
|
The following tables summarize the forecast information and synergy estimates provided to and used by Goldman Sachs in financial analyses
it performed in February 2011 in connection with the merger contemplated under the terms of the original merger agreement:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Zoran Standalone Financial Forecast Information
|
|
|
|
2011
|
|
|
2012
|
|
|
2013
|
|
|
2014
|
|
|
|
U.S.$ in millions
|
|
Revenue
|
|
$
|
469
|
|
|
$
|
547
|
|
|
$
|
635
|
|
|
$
|
729
|
|
EBITDA
|
|
$
|
15
|
|
|
$
|
50
|
|
|
$
|
85
|
|
|
$
|
126
|
|
Net income
|
|
$
|
0
|
|
|
$
|
39
|
|
|
$
|
72
|
|
|
$
|
110
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CSR Standalone Financial Forecast Information
|
|
|
|
2011
|
|
|
2012
|
|
|
2013
|
|
|
2014
|
|
|
|
U.S.$ in millions
|
|
Revenue
|
|
$
|
831
|
|
|
$
|
955
|
|
|
$
|
1,098
|
|
|
$
|
1,265
|
|
EBITDA
|
|
$
|
106
|
|
|
$
|
154
|
|
|
$
|
188
|
|
|
$
|
233
|
|
Net income
|
|
$
|
71
|
|
|
$
|
106
|
|
|
$
|
133
|
|
|
$
|
170
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined Company Potential Synergies
|
|
|
|
2011
|
|
|
2012
|
|
|
2013
|
|
|
2014
|
|
|
|
U.S.$ in millions
|
|
Revenue
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
100
|
|
|
$
|
200
|
|
Cost of sales
|
|
$
|
3
|
|
|
$
|
15
|
|
|
$
|
17
|
|
|
$
|
20
|
|
Operating expense
|
|
$
|
3
|
|
|
$
|
35
|
|
|
$
|
35
|
|
|
$
|
35
|
|
The following tables summarize financial forecast information that Zorans management considered to
be an alternative to the February 2011 case described above:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Zoran Standalone Financial Forecast Information
|
|
|
|
2011
|
|
|
2012
|
|
|
2013
|
|
|
2014
|
|
|
|
U.S.$ in millions
|
|
Revenue
|
|
$
|
469
|
|
|
$
|
615
|
|
|
$
|
772
|
|
|
$
|
963
|
|
EBITDA
|
|
$
|
15
|
|
|
$
|
71
|
|
|
$
|
135
|
|
|
$
|
220
|
|
Net income
|
|
$
|
0
|
|
|
$
|
56
|
|
|
$
|
115
|
|
|
$
|
192
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CSR Standalone Financial Forecast Information
|
|
|
|
2011
|
|
|
2012
|
|
|
2013
|
|
|
2014
|
|
|
|
U.S.$ in millions
|
|
Revenue
|
|
$
|
851
|
|
|
$
|
1,048
|
|
|
$
|
1,283
|
|
|
$
|
1,508
|
|
EBITDA
|
|
$
|
117
|
|
|
$
|
190
|
|
|
$
|
243
|
|
|
$
|
303
|
|
Net income
|
|
$
|
80
|
|
|
$
|
133
|
|
|
$
|
176
|
|
|
$
|
225
|
|
All of the foregoing forecasts and estimates are forward-looking statements that are subject to risks and
uncertainties that could cause actual results to differ materially from those predicted, and should be read with caution. See Cautionary Statement Regarding Forward-Looking Statements on page 50. The forecasts and
-91-
estimates are subjective in many respects and thus susceptible to interpretations and periodic revisions based on actual experience and developments occurring since the date the forecasts and
estimates were prepared. Although presented with numerical specificity, the forecasts and estimates are based upon a variety of assumptions made by Zorans management. These assumptions are inherently subject to significant business, economic
and competitive uncertainties and contingencies, all of which are difficult to predict and many of which are beyond Zorans control. The effect of such uncertainties and contingencies on the forecasts and estimates will generally be greater on
forecasts and estimates that cover periods further in the future. Accordingly, the assumptions made in preparing the forecasts and estimates might not prove accurate, and actual results might differ materially. In addition, the forecasts and
estimates do not take into account any of the transactions contemplated by the merger agreement, including the merger and associated expenses, or CSRs or Zorans compliance with their respective covenants under the merger agreement, all
of which might also cause CSRs or Zorans actual results to differ materially.
For these reasons, the inclusion of
forecasts and estimates in this proxy statement/prospectus should not be regarded as an indication that they will be an accurate prediction of future events whether or not the merger is completed, and they should not be relied on as such. Neither
Zoran nor any other person intends, or undertakes any obligation, to update or otherwise revise the forecasts and estimates to reflect circumstances existing after the date they were prepared, or to reflect the occurrence of future events, even if
any or all of the assumptions are shown to be inaccurate. You are cautioned not to rely on this information in making a decision whether to vote in favor of the adoption of the merger agreement.
Interests of Directors and Officers of Zoran in the Merger
Certain executive officers and directors of Zoran have interests in the merger agreement and the merger that are different from or in
addition to the interests of Zorans stockholders generally. The board of directors of Zoran was aware of and considered these interests when it considered and approved the merger agreement and the merger. Information is set forth below about
severance and other benefits that may become available to Zorans executive officers if their employment with Zoran is terminated in connection with the merger, but as of the date of this proxy statement/prospectus it has not been determined
whether they will remain employed by Zoran or CSR after the merger.
Change-in-Control Agreements
Zoran maintains an Executive Retention and Severance Plan (the Retention Plan) that provides for certain benefits for
Zorans executive officers and certain key employees in connection with a change in control of Zoran. The merger would constitute a change in control under the Retention Plan.
The Retention Plan provides for the payment of severance benefits to a participant who, within 18 months after the merger, is terminated
without cause or resigns as a result of good reason to the extent such termination constitutes a separation from service under Section 409A of the Internal Revenue Code of 1986, as amended, or the Code. Upon such termination, the participant would
be entitled to a lump sum payment in an amount equal to the aggregate amount of his base salary and annual bonus for a period of 36 months in the case of the chief executive officer and 18 months in the case of other executive officers. For these
purposes, the annual bonus amount would equal the greatest of
|
|
|
the participants aggregate bonus for the fiscal year immediately preceding the fiscal year of the change in control,
|
|
|
|
the participants aggregate bonus for the fiscal year immediately preceding the fiscal year of the participants termination of employment,
or
|
|
|
|
the participants aggregate target bonus (assuming attainment of 100% of all applicable performance goals) for the fiscal year of the
participants termination.
|
-92-
Zoran would also provide health (including medical and dental) benefits to the participant
and his or her dependents and life insurance benefits to the participant, for 36 months in the case of the chief executive officer and 18 months in the case of other executive officers, at the same premium cost to the participant and coverage levels
in effect at the time of termination. Generally, the participants outstanding equity awards become fully vested and, in the case of stock options and stock appreciation rights, will generally remain exercisable for a period of one year after
such termination. Zoran is also obligated to indemnify the participant for claims or actions arising out of the participants services to Zoran and would maintain directors and officers liability insurance for six years following
the date of the participants termination. If the benefits described above or otherwise received by a participant in connection with a change in control would cause the participant to be subject to any excise tax under Section 4999 of the
Internal Revenue Code of 1986, as amended, or the Code, the payments under the Retention Plan would be automatically reduced if such reduction would result in a greater after-tax benefits to the participant.
Cause for termination would include certain acts by the participant of fraud, embezzlement or dishonesty, unauthorized use or disclosure
of confidential information or trade secrets, or intentional misconduct adversely affecting Zorans business. Good reason for an executives resignation would generally include a reduction in duties, salary, target bonus or benefits, or a
relocation of more than 30 miles, in each case without the participants consent.
On May 10, 2011, restricted stock unit
awards and performance stock option awards were granted to Zorans executive officers, as described below under Additional Equity Awards. Each executive officers award is conditioned, if the merger closes prior to
October 20, 2011, on his waiver of the automatic vesting provisions mentioned above relating to a termination following the merger. Solely with the respect to these May 10, 2011 awards, the performance stock options will convert to
time-based vesting options for the remainder of the vesting period and the restricted stock units will continue to vest according to their vesting schedule following the closing of the merger, unless the Compensation Committee determines otherwise,
in its sole discretion.
Other Termination Agreements
In December 1997, Zoran issued an offer letter to Karl Schneider, pursuant to which, if Mr. Schneiders employment with Zoran is
terminated, either by Zoran or Mr. Schneider, for a reason other than cause, as such term is defined in the offer letter, the other party to the letter is entitled to three months notice. However, if Mr. Schneider accepts
an offer of employment from another company while still employed with Zoran, Mr. Schneider must notify Zoran within 12 hours of acceptance of such offer, and Zoran may terminate Mr. Schneiders employment without providing advance
notice.
Managers Insurance Fund
Zoran makes contributions on behalf of all of its full time Israeli employees to a fund known as Managers Insurance. Dr. Shenberg, who is resident in Israel, is a beneficiary of this fund. This
fund provides a combination of retirement plan, insurance and severance pay benefits to the employee, giving the employee or his or her estate payments upon retirement, disability or death and securing the severance pay, if the employee is legally
entitled to any, due upon termination of employment. Each full-time employee of Zoran in Israel is entitled to participate in the plan, and each employee who participates contributes an amount equal to 5% of his or her salary to the retirement plan
and Zoran contributes between 13.33% and 15.83% of the employees salary (consisting of 5% to the retirement plan, 8.33% to secure severance payments and up to 2.5% for disability insurance). Under the retirement plan component of the
Managers Insurance, all of Zorans contributions and the contributions made by the employee are immediately vested and non-forfeitable upon contribution to the Managers Insurance fund.
-93-
The following table presents the dollar value of the cash severance benefits payable to
Zorans executive officers in the event of their termination without cause or resignation with good reason within 18 months following a change in control, assuming that termination took place on June 30, 2011.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name and Position
|
|
Cash
Severance
(Salary and
Bonus)
|
|
|
Continued
Welfare
Benefits
|
|
|
Cash
Severance
under
Managers
Insurance
Fund
|
|
|
Acceleration
of
Equity
Awards
(1)
|
|
|
Total
|
|
Levy Gerzberg, Ph.D.
|
|
$
|
2,646,000
|
|
|
$
|
131,462
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
2,777,462
|
|
President, Chief Executive Officer and Director
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Karl Schneider
|
|
$
|
720,120
|
|
|
$
|
60,093
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
780,213
|
|
Senior Vice President, Finance and Chief Financial Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Isaac Shenberg, Ph.D.
(2)
|
|
$
|
671,264
|
|
|
$
|
13,356
|
|
|
$
|
546,422
|
|
|
$
|
|
|
|
$
|
1,231,043
|
|
Senior Vice President, Corporate Marketing and Business Development
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Represents the intrinsic value of the unvested portions of the executives options that would accelerate pursuant to the Retention Plan upon a termination without
cause or a termination for good reason during the 18-month period following a change in control. This value is calculated by multiplying the amount (if any) by which $8.44 (the closing price of common stock on July 20, 2011) exceeds the exercise
price of the option by the number of shares subject to the accelerated portion of the option.
|
(2)
|
Dollar value calculated based on the ILS/USD exchange rate of 3.4186, which was the exchange rate at 7:21 p.m. Eastern time on July 20, 2011.
|
Treatment of Stock Options and Restricted Stock Units
The merger agreement provides that all of the outstanding stock options and RSUs granted by Zoran, including those held by Zorans
directors and executive officers, will be assumed by CSR and converted into stock options and RSUs for CSR ADSs. The converted stock options and RSUs will be subject to the same terms and conditions in effect for the outstanding stock options and
RSUs prior to the merger. The exercise price and number of CSR ADSs underlying the stock options and the number of CSR ADSs subject to the RSUs will be adjusted according to the exchange ratio.
As discussed above under Change in Control Agreements, outstanding equity awards held by Zorans executive
officers and certain key employees who participate in the Retention Plan will become fully vested and, in the case of stock options, will generally remain exercisable for a period of one year if the executive officer or key employee is terminated
without cause or resigns as a result of good reason within 18 months after the merger. In the case of options granted to Dr. Gerzberg, the vested portion of the option will remain exercisable for the remainder of its term (or, if earlier, the date
Dr. Gerzberg accepts a senior executive position with another company) if Dr. Gerzbergs continuous service as a member of Zorans board of directors, or a successor to or parent of Zoran, including CSR, is terminated as a result of his
retirement. (For these purposes, continuous service is as defined in the relevant option plan underlying the option and retirement is defined as either Dr. Gerzbergs voluntary resignation from the Zoran board (or,
after the merger, the CSR board of directors) or the expiration of his term as a director on the Zoran board (or, after the merger, the CSR board of directors) after he has declined to stand for re-election.)
Under the terms of the Zoran Corporation 2005 Outside Directors Equity Plan, any outstanding and unvested stock options awarded to
Zorans outside directors under the plan will become immediately exercisable in full upon the consummation of the merger. In addition, under the terms of each non-employee directors stock option agreement, if the director has served
continuously on the Zoran board for at least two years and the directors service is terminated as a result of his retirement, the vested and unexercised portion of the option will
-94-
remain exercisable until the options original expiration date. (For these purposes, service is as defined in the relevant option plan underlying the option and
retirement is defined as the directors voluntary resignation from the Zoran board (or, after the merger, the CSR board of directors) or the expiration of his term as a director on the Zoran board (or, after the merger, the CSR
board of directors) after he has declined to stand for re-election.) The table below sets forth for Zorans outside directors (serving as of the date of this proxy statement/prospectus or any time since January 1, 2010) the number of shares of
Zoran common stock underlying unvested stock options with exercise prices below the market price of Zoran common stock on July 20, 2011, the weighted average exercise price of such options and the value of such options based on the differences
between the exercise prices and the market price of Zoran common stock on July 20, 2011.
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Shares
Underlying
Unvested Stock
Options
|
|
|
Weighted
Average
Exercise Price
|
|
|
Total Amount
Realizable in
Connection
with
Acceleration
|
|
Uzia Galil
(1)(2)
|
|
|
0
|
|
|
|
|
|
|
|
|
|
Raymond A. Burgess
|
|
|
15,000
|
|
|
$
|
10.15
|
|
|
$
|
0
|
|
Jon S. Castor
(1)(3)
|
|
|
30,000
|
|
|
$
|
11.03
|
|
|
$
|
0
|
|
Dale Fuller
(1)(3)
|
|
|
30,000
|
|
|
$
|
11.03
|
|
|
$
|
0
|
|
James D. Meindl, Ph.D.
(1)(2)
|
|
|
0
|
|
|
|
|
|
|
|
|
|
James B. Owens, Jr.
|
|
|
15,000
|
|
|
$
|
10.15
|
|
|
$
|
0
|
|
Jeffrey C. Smith
(1)(3)
|
|
|
30,000
|
|
|
$
|
11.03
|
|
|
$
|
0
|
|
Arthur B.
|
|
|
15,000
|
|
|
$
|
10.15
|
|
|
$
|
0
|
|
Philip M. Young
(1)(2)
|
|
|
0
|
|
|
|
|
|
|
|
|
|
(1)
|
On March 3, 2011, Ramius Value and Opportunity Master Fund Ltd (Ramius) delivered the requisite consents to elect three new independent directors to
Zorans board of directors in substitution for three of Zorans then-current independent Board members. Mr. , Dr. Meindl and Mr. Young, the three longest-serving Board members, were replaced by Messrs. Castor, Fuller and
Smith.
|
(2)
|
The unvested portion of the outstanding options held by each of Mr. Galil, Dr. Meindl and Mr. Young terminated immediately upon his termination of
service. The vested portions of the options will remain exercisable until the earlier of three months following the date of the holders termination and the expiration dates of the options. Because his unvested options have terminated and his
vested options will have expired before the closing of the merger, Mr. Galil, Dr. Meindl and Mr. Young each will not realize any amounts from the closing of the merger from the options he held on February 20, 2011 or on July 20,
2011.
|
(3)
|
In connection with Ramius delivery of the requisite consents to elect Messrs. Castor, Fuller and Smith as directors to Zorans board of directors, in
accordance with Zorans corporate governance guidelines, each of them received 30,000 options with a strike price of $11.03 per share, the closing price of Zorans common stock on March 3, 2011, that will vest in four years in equal
installments from the date of issuance.
|
Continued Employment
CSR and certain of Zorans executive officers are currently in discussions regarding the potential roles of such executive officers
with CSR after the merger. To date there has been no agreement between CSR and Zorans executive officers regarding their roles with CSR after the merger, the length of their anticipated tenure with CSR, or their compensation.
Composition of CSRs Board of Directors after the Consummation of the Merger
The merger agreement provides that, effective as of the effective time, CSR will appoint to its board of directors Dr. Gerzberg as a
non-executive director. CSR intends to enter into a letter of appointment with Dr. Gerzberg, but no specific arrangements have been made to date, other than CSRs intention to extend indemnity rights to Dr. Gerzberg that are
substantially similar to those offered to members of CSRs existing board of directors. The other members of CSRs board of directors at the effective time of the merger will remain the same.
-95-
Indemnification and Insurance
The merger agreement provides that, following the consummation of the merger, all rights to indemnification, advancement of expenses and
exculpation existing on the date of the merger agreement in favor of any present or former director or officer of Zoran or any of its subsidiaries will survive the merger. CSR has agreed not to amend, repeal or otherwise modify the provisions in
Zorans organizational documents, any organizational documents of any of its subsidiaries or any agreement providing for indemnification advancement of expenses and exculpation in any manner that would adversely affect the rights thereunder of
any such individual.
CSR has agreed to indemnify all present or former directors or officers of Zoran or any of its
subsidiaries to the fullest extent permitted by applicable laws with respect to all claims arising from the fact of being a director or officer of Zoran or any of its subsidiaries prior to the completion of the merger or from acts and omissions
arising out of or relating to their services as directors or officers of Zoran or its subsidiaries prior to completion of the merger. CSR has agreed to pay as incurred any such indemnified persons legal fees, costs and expenses incurred in
connection with such legal action, subject to CSRs receipt of an undertaking from such person to repay such legal fees, costs and expenses if it is ultimately determined under applicable laws that such person is not entitled to be indemnified.
The merger agreement provides that CSR shall maintain, for at least seven years following the completion of the merger,
policies of directors and officers liability insurance of at least the same coverage and amounts, containing terms and conditions no less advantageous to the individuals covered by these policies than those in effect on the date of the
merger agreement, except that CSR will not be required to pay an annual premium for these policies in excess of $744,000. The merger agreement also provides that Zoran or CSR may obtain one or more seven-year prepaid tail insurance
policies in lieu of the policies of directors and officers liability insurance currently maintained by Zoran providing the same coverage and amounts and terms and conditions as Zorans current policies. If either Zoran or CSR
obtains such tail insurance, CSR will not be required to otherwise maintain replacement directors and officers liability insurance for the individuals covered by Zorans current directors and officers
liability insurance policies.
Additional Equity Awards
Under the merger agreement, Zoran is permitted to pay up to $1,000,000 in retention bonuses to participants in the Retention Plan and
grant new options for up to 1,800,000 shares and new RSUs for up to 800,000 shares of Zorans common stock. Such equity awards and bonuses may be granted or awarded to Zorans directors and executive officers. On May 10, 2011, restricted
stock unit awards and performance stock options (at target) were granted to Zorans executive officers in the following amounts:
|
|
|
|
|
|
|
|
|
Name
|
|
Restricted Stock
Units
|
|
|
Performance Based
Options
|
|
Levy Gerzberg
|
|
|
|
|
|
|
350,000
|
|
Karl Schneider
|
|
|
|
|
|
|
90,000
|
|
Isaac Shenberg
|
|
|
20,000
|
|
|
|
70,000
|
|
The restricted stock units will vest over four years commencing with the anniversary of the grant date
and semiannually thereafter. The performance stock options will vest annually over four years based on the achievement of performance targets established by the committee that are based on corporate and individual performance. As noted above under
Change-in-Control Arrangements, each executive officers award is conditioned, if the merger closes prior to October 20, 2011, on his waiver of the automatic vesting provisions under the Retention Plan relating to a
termination following the merger. Following the closing of the merger, these performance stock options will convert to time-based vesting options for the remainder of the vesting period and the restricted stock units will continue to vest according
to their vesting schedule, unless the committee determines otherwise, in its sole discretion.
-96-
Board of Directors and Management of CSR Following the Consummation of the
Merger
Upon the consummation of the merger, CSRs board of directors will be expanded by the appointment of
Dr. Levy Gerzberg (age 66) as a non-executive director. The CSR Board will continue to be chaired by Ron Mackintosh, and the Combined Company will be headed by CSRs CEO Joep van Beurden. Will Gardiner will continue as CFO. It is
anticipated that certain other members of Zorans senior management may have management roles with the Combined Company, but no agreements have been entered into in this regard to date and CSR is under no obligation to do so.
In determining to offer Dr. Levy Gerzberg a position as a non-executive director of CSR, the board of directors of CSR considered
that his knowledge and experience in the management of Zoran and his extensive understanding of the industries in which Zoran operates will be beneficial not only to the integration of CSR and Zoran, but also to the development of the business of
the Combined Company going forward. Dr. Gerzberg was a co-founder of Zoran in 1981 and has served as Zorans President and Chief Executive Officer since 1988 and as a director since 1981. Dr. Gerzberg also served as Zorans
President from 1981 to 1984 and as Zorans Executive Vice President and Chief Technical Officer from 1985 to 1988. Prior to co-founding Zoran, Dr. Gerzberg was Associate Director of Stanford Universitys Electronics Laboratory.
Zoran Compensation of the Proposed Director
The aggregate compensation details of Dr. Gerzberg, in his role as President, Chief Executive Officer and Director of Zoran, for Zorans last financial year, are set out below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salary
|
|
|
Option
Awards
(1)
|
|
|
Bonuses
|
|
|
All
Other
Compensation
(2)
|
|
|
2010
total
|
|
Levy Gerzberg, Ph.D.
|
|
$
|
420,000
|
|
|
$
|
984,996
|
|
|
|
|
|
|
$
|
2,594
|
|
|
$
|
1,407,590
|
|
(1)
|
The amount reported in the Option Awards column of the table above reflects the fair value on the grant date of the option awards granted to Dr. Gerzberg
during 2010. This value has been determined under the principles used to calculate the value of equity awards for purposes of Zorans financial statements. For a discussion of the assumptions and methodologies used to value the option award
reported in this column, please see the discussion of stock awards and option awards contained in Note 10 of Notes to Consolidated Financial Statements in Zorans Annual Report on Form 10-K for the year ended December 31, 2010. Under general
accounting principles, compensation expense with respect to stock awards and option awards granted to Zoran employees and directors is generally recognized over the vesting periods applicable to the awards.
|
(2)
|
Represents matching contributions to Dr. Gerzbergs 401(k) plan account and premiums paid by Zoran with respect to term life insurance for the benefit of Dr.
Gerzberg.
|
2010 Grants of Plan-Based Awards
The following table provides certain information concerning grants of options to purchase Zoran common stock made to Dr. Gerzberg during the year ended December 31, 2010. The table also provides
information with regard to cash bonuses awarded for 2010 under Zorans performance-based, non-equity incentive plan to Dr. Gerzberg.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Potential
Payouts
Under
Non-Equity Incentive Plan
Awards
(2)
|
|
|
All Other
Stock
Awards:
Number
of Shares
of Stock
or Units
(#)
|
|
|
All Other
Option
Awards:
Number
of
Securities
Underlying
Options
(#)
|
|
|
Exercise
or
Base
Price of
Option
Awards
($/sh)
|
|
|
Grant
Date Fair
Value of
Stock and
Option
Awards
(3)
|
|
Name
|
|
Grant
Date
|
|
|
Approval
Date
(1)
|
|
|
Threshold
($)
|
|
|
Target
($)
|
|
|
Maximum
($)
|
|
|
|
|
|
Levy Gerzberg, Ph.D.
|
|
|
N/A
|
|
|
|
N/A
|
|
|
$
|
336,000
|
|
|
$
|
420,000
|
|
|
$
|
504,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4/28/2010
|
|
|
|
4/20/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
200,500
|
|
|
$
|
9.86
|
|
|
$
|
984,996
|
|
-97-
(1)
|
On April 20, 2010, Zorans Compensation Committee approved option grants to Zorans named executive officers, at an option exercise price per share equal
to the closing price of Zorans common stock on the second trading day after announcement of Zorans final financial results for the quarter ended March 31, 2010 (which was April 28, 2010).
|
(2)
|
These columns reflect the threshold, target and maximum amounts for Dr. Gerzbergs bonus opportunity for 2010.
|
(3)
|
The amounts reported in this column reflect the fair value of these awards on the grant date as determined under the principles used to calculate the value of equity
awards.
|
Details of the Zoran options exercised by Dr. Gerzberg during Zorans last financial year, and
details of any gains arising on the exercise of Zorans options during such period are shown below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Grant description
|
|
|
Date of exercise
|
|
|
Number
exercised
|
|
|
Cost per
share
|
|
|
Market
value
per share
|
|
|
2008
Gains on
exercise
|
|
Levy Gerzberg, Ph.D.
|
|
|
|
|
|
|
|
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Details of the options to purchase Zoran common stock held by Dr. Gerzberg as of December 31, 2010, are
as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
Name
|
|
Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
|
|
|
Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
|
|
|
Option
Exercise
Price ($)
|
|
|
Option
Expiration
Date
|
|
Levy Gerzberg, Ph.D.
|
|
|
42,375
|
|
|
|
|
|
|
$
|
14.6900
|
|
|
|
8/9/2012
|
(1)
|
|
|
|
178,125
|
|
|
|
|
|
|
$
|
14.6900
|
|
|
|
8/9/2012
|
(1)
|
|
|
|
15,572
|
|
|
|
|
|
|
$
|
24.7800
|
|
|
|
7/15/2013
|
(1)
|
|
|
|
304,679
|
|
|
|
|
|
|
$
|
24.7800
|
|
|
|
7/15/2013
|
(2)
|
|
|
|
180,000
|
|
|
|
|
|
|
$
|
13.5900
|
|
|
|
8/19/2015
|
(3)
|
|
|
|
91,667
|
|
|
|
8,333
|
|
|
$
|
19.7800
|
|
|
|
4/26/2017
|
(3)
|
|
|
|
76,667
|
|
|
|
38,333
|
|
|
$
|
14.2100
|
|
|
|
4/23/2018
|
(3)
|
|
|
|
109,375
|
|
|
|
153,125
|
|
|
$
|
8.9400
|
|
|
|
4/30/2019
|
(3)
|
|
|
|
|
|
|
|
200,500
|
|
|
$
|
9.8600
|
|
|
|
4/28/2020
|
(3)
|
(1)
|
Option is immediately exercisable and vests over four years, with 1/48th of the shares vesting each month.
|
(2)
|
Option is immediately exercisable and vests over four years, with 25% of the shares vesting after one year and 1/48th of the shares vesting each month thereafter.
|
(3)
|
Option vests over four years, with 25% vested and exercisable after one year from the grant date and 1/48th of the shares vesting each month thereafter.
|
Description of Non-Equity Incentive Plan Awards
Zoran uses incentive bonuses to reward performance and achievements with a time horizon of approximately one year. Zorans Compensation Committee generally establishes both target financial
objectives and individual objectives each year, although the annual bonus for Dr. Gerzberg over the past several years has been based entirely on the achievement of Zorans financial goals. Zorans Compensation Committee has also
provided in recent years that no bonuses would be paid to its executive officers unless it achieved a positive level of net income for the year.
For 2010, the Compensation Committee approved a performance-based cash bonus policy (2010 Bonus Policy) for Zorans named executive officers. The 2010 Bonus Policy was designed to reward
executives for Zorans achievement of key financial objectives and individual achievement of more specific goals. In all cases, the bonuses were contingent upon delivering positive non-GAAP net income for 2010. Zorans Compensation
-98-
Committee set each executives target bonus, expressed as a percentage of base salary, and selected the financial targets, which were revenue and non-GAAP earnings per share. Under the 2010
Bonus Policy, the bonus for Dr. Gerzberg was based entirely on Zorans financial performance. Zorans Compensation Committee also retained discretion to increase or decrease the final bonus amount awarded to the executive. In
addition, the aggregate amount of the bonuses paid to Zorans executive officers, general managers and vice presidents may not exceed 25% of the total bonuses paid for all of our employees.
Under the 2010 Bonus Policy, Dr. Gerzbergs target bonus was 100% of base salary. In 2010, the financial targets for bonus
purposes were a revenue target of $457.4
million and a non-GAAP earnings-per-share target of $0.47. Because Zoran did not achieve positive non-GAAP net income for 2010, no bonus was paid to Dr. Gerzberg for 2010.
CSRs Reasons for the Merger
At a meeting held on June 15, 2011, the board of directors of CSR unanimously determined to approve the amended and restated merger agreement and the merger subject to finalization of certain outstanding
issues, with respect to which the board of directors of CSR appointed a subcommittee to which it delegated authority to resolve the remaining issues and approve the amended and restated merger agreement as so modified. The subcommittee subsequently
approved the amended and restated merger agreement on June 16, 2011.
CSRs strategy is to provide semiconductor and
software based solutions that enhance consumers experience in a location-aware, wire-free, connected world. There is a rapidly growing demand for devices that capture and play video and audio, are increasingly inter-connected and
inter-operable, are able to indicate the users location via GPS or other positioning systems, and are able to wirelessly connect via technologies such as Bluetooth and Wi-Fi.
Examples of such devices include smartphones, cameras with geo-tagging and wireless connections, TVs with high definition video and
wireless connectivity, and automobiles with GPS for navigation. Currently, manufacturers are looking for suppliers who can provide differentiated solutions in all these areas, which has been confirmed by the positive feedback on the merger given by
existing and potential customers during management meetings conducted by CSR following the announcement of the merger.
As CSR
has grown, it has also enhanced its knowledge, expertise and global presence in order to meet the evolving requirements of its customers. This has been achieved by adding capabilities in areas adjacent to Bluetooth, such as GPS, through the
acquisition of SiRF; Wi-Fi, which it has developed internally; and audio, which it has developed both internally and through acquisitions such as Clarity Technologies and aptX. Given the increasing importance of visual content, the merger represents
a further important step in CSRs strategic development, creating a global leader in wireless connectivity, location-aware products, imaging and video, and audio technology. It is expected to:
|
|
|
strengthen and diversify CSRs business with Zorans complementary products, technology, expertise and attractive customer relationships;
|
|
|
|
create new growth opportunities by increasing CSRs scale and addressable market, enabling the Combined Company to unlock and potentially expand
the growing area of next-generation connected devices with innovative high quality audio-visual content technologies for use in the home, the office, the car, or otherwise on the move;
|
|
|
|
reduce the time to market for new products, while increasing their value to customers through combining technologies and expertise; and
|
|
|
|
generate attractive financial results.
|
In reaching its decision to approve the merger, CSRs board of directors consulted with CSRs management, as well as its outside advisors, and considered a number of factors. The material
factors they considered are summarized below. The below discussion of the factors considered by CSRs board of directors is not intended to be exhaustive, but includes the material factors considered by CSRs board of directors.
-99-
Strengthen CSRs existing business
CSRs board of directors believed that the merger would strengthen CSRs existing business and concluded that the merger would
boost CSRs existing business in a variety of ways, as described below:
Zorans image and video capture and display
technology complements CSRs suite of connectivity, audio and location-aware products. By combining products and expertise, the portfolio of solutions available to the customers of both companies is expected to be enhanced. For example:
|
|
|
Connected and location-aware cameras are already an exciting near-term reality. CSR has GPS and Wi-Fi solutions for the camera market and these can be
combined with Zorans market-leading proprietary camera-on-a-chip (COACH) platform, enabling the software and RF (Radio Frequency) design for these solutions to be pre-integrated, so reducing customers implementation costs and improving their
time to market.
|
|
|
|
The wireless connected home is a rapidly developing area in consumer electronics. CSR has Wi-Fi, Audio and Bluetooth chips, which it promotes into home
entertainment markets. With the addition of Zorans digital television (DTV), printer, camera, and silicon tuner platforms, CSRs product offerings and routes to market will be expanded. This increases the opportunity to win business in
the connected TV and home entertainment arena, by adding Wi-Fi wireless surround sound, Bluetooth low energy and Bluetooth low energy for 3D glasses, to Zorans existing offerings.
|
|
|
|
CSR has strong relationships with automotive manufacturers, to whom it supplies Bluetooth, Wi-Fi and GPS solutions. Automotive companies are
increasingly building-in video and camera functionality to their products, and are actively looking for technology providers that can combine connectivity, location and imaging technologies. As a result, the merger enhances the prospects of selling
Zorans market-leading video and imaging technology alongside CSRs connectivity and location solutions to these customers.
|
The two companies mutually serve many global customers and the merger will increase CSRs relevance with key consumer electronics companies. With 80 per cent of pro forma revenue coming from
markets where the Combined Company has a market leading position, it will be better able to leverage its extended product and technology portfolio.
The addition of Zorans intellectual property rights of more than 850 issued and pending patents built up over 25 years significantly expands CSRs intellectual property rights portfolio, which
is expected to increase the Combined Companys ability to compete in the global semiconductor market.
The merger
broadens the scope of CSRs markets and business model, increasing diversity by both market and technology, while adding major software components to CSRs existing product portfolio.
Create new growth opportunities
CSRs board of directors believed that combining CSRs and Zorans technology, commercial relationships and people is expected to increase incremental growth for the Combined Company. More
specifically, CSRs board of directors believed that:
|
|
|
There is an increasing amount of media-rich technology being delivered to consumer electronic devices, which require enhanced connectivity, audio and
image/video quality. CSR is an innovator in wireless, audio and locations systems, while Zoran has a strong track record in the development of video and imaging technology. For example, in the digital still camera segment (DSC), Zoran has a leading
market share with its COACH image processor while CSR enjoys significant traction with its SiRFStar4e product for geo-tagging, enabling the Combined Company to build on their combined strengths as DSCs become more connected and location-aware.
|
-100-
|
|
|
The merger will create stronger strategic relationships with key customers. The richer technology portfolio resulting from the merger will deliver a
product range which is more closely aligned to customers requirements, allowing them to increasingly differentiate their products to consumers. In addition, combining technologies will simplify R&D challenges and support a faster time to
market for customers products and reduce their associated execution requirements, risk and costs.
|
|
|
|
Together, the companies will have a world-class team in research, development, marketing, sales and manufacturing. The Combined Company will draw upon
a global talent pool that has been assembled over many years and is at the forefront of innovation in wireless connectivity, location-aware products, audio, imaging and video technology. This will further enhance its capability to win in current, as
well as future growth markets.
|
|
|
|
Both companies will have greater access to a range of technologies and capabilities, enabling the Combined Company to develop products and solutions
more efficiently. By designing and specifying integrated products within one company, the Combined Company should be able to bring products more quickly to market, while reducing its development costs and simplifying its manufacturing procedures. A
quicker time to market, lower developmental costs and a wider and deeper engagement with customers, while meeting their preference for fewer, bigger suppliers should result in it capturing a greater proportion of the final product value.
|
Reduce time to market for new products and increasing margin
Both companies will have greater access to a range of technologies and capabilities, enabling the Combined Company to develop products and
solutions more efficiently. By designing and specifying integrated products within one company, the Combined Company should be able to bring products more quickly to market. The merger significantly increases the scale of CSRs business, which
will lead to improved supply chain efficiency, enhanced purchasing power and cross-fertilization of manufacturing techniques. This will enable CSR to reduce its development costs and simplify its manufacturing procedures so providing products with
an improved margin. A shorter time to market, lower development costs and a wider and deeper engagement with customers, while meeting their preference for fewer, bigger suppliers, provides the Combined Company with the opportunity to capture a
greater proportion of the final product value.
Generate attractive financial results
CSRs board of directors expects the merger to generate attractive financial results, as described below:
|
|
|
enhancing the Combined Companys earnings, growth and gross margin profile;
|
|
|
|
accelerating revenue from platforms, meeting CSRs goal of increasing its revenues from this product area; and
|
|
|
|
diversifying revenues across technologies, market segments and customers.
|
CSR expects to generate run rate cost synergies of $50 million across the Combined Company by the end of the first quarter of 2012, while
continuing investment in the combined technology pipeline. One-off charges relating to overall integration and realization of cost synergies are expected to total approximately $50 million. Of the targeted savings, $35 million of synergies are
expected from a reduction in operating expenditure and $15 million of synergies from a reduction in cost of goods sold. These synergies are in addition to the ongoing $30 million cost reductions already undertaken at Zoran.
In addition, CSR expects to achieve further identified rightsizing savings at an annual run rate of $20 million. Both cost
synergies and rightsizing savings are expected to be achievable by the end of the first quarter 2012 based upon extensive integration planning.
-101-
As a result of these actions of the Combined Company and the actions Zoran is already
undertaking on a standalone basis, the net increase in CSRs run rate operating costs compared to CSR on a standalone basis is expected to be approximately $175 million by the end of first quarter of 2012, compared to the first quarter 2011
Zoran run rate of approximately $260 million.
Importantly, taking into account the full run rate of the expected cost
synergies and identified rightsizing savings, as well as the ongoing cost savings at Zoran, the merger is expected to provide more than 15% EPS accretion in 2012, before any incremental revenue synergies and one-off costs.
CSR also considered a variety of other factors and risks concerning the merger, including the following:
|
|
|
the aggregate merger consideration for the combination including the exchange ratio applicable to the non-cash portion of the merger consideration;
|
|
|
|
the execution by CSR of its long-term strategic objectives and the contribution that Zoran, its employees, experience, technology and intellectual
property may provide in implementing part of these objectives;
|
|
|
|
the financial and operating performance and condition and long-term prospects of Zoran, CSR and the Combined Company;
|
|
|
|
current industry developments, including continuing consolidation;
|
|
|
|
the terms and conditions of the merger agreement;
|
|
|
|
the potential problems inherent in effecting an international combination of two organizations which may divert attention from the ongoing business of
the Combined Company;
|
|
|
|
the possibility that Zoran stockholders will not vote in favor of adopting the merger agreement;
|
|
|
|
the risk that key employees of Zoran or CSR may not remain with the Combined Company after the merger;
|
|
|
|
the risk that the Combined Company may lose customers as a result of the transaction or otherwise;
|
|
|
|
the risk of existing litigation involving Zoran having material adverse consequences;
|
|
|
|
the rationale for proceeding with any such transaction;
|
|
|
|
the alternatives available to CSR, including the option of not proceeding with any such transaction;
|
|
|
|
the effects of the merger in the short term, and the potential resulting sales of CSR ADSs by some Zoran stockholders, on the market price of CSR ADSs;
and
|
|
|
|
the risks and uncertainties associated with integrating geographically dispersed businesses and realizing the revenue and cost synergies that CSR
believes are achievable.
|
The foregoing discussion of the factors considered by CSRs board of
directors is not intended to be exhaustive, but includes the material factors considered by CSRs board of directors. In view of the wide variety of factors considered by CSRs board of directors in connection with its evaluation of the
merger and the complexity of these matters, CSRs board of directors did not consider it practical, and did not attempt, to quantify, rank or otherwise assign relative weights to the specific factors it considered in reaching its decision.
CSRs board of directors conducted discussions of the factors described above, including asking questions of CSRs management and CSRs outside advisors. CSRs board of directors reached a unanimous consensus that the merger
would promote the success, and was in the best interests, of CSR and its shareholders as a whole. In considering the factors described above, individual members of CSRs board of directors may have given different weights to different factors.
-102-
In determining to offer Dr. Levy Gerzberg a position as a non-executive director of
CSR, the board of directors of CSR considered that his knowledge and experience in the management of Zoran and his extensive understanding of the industries in which Zoran operates will be beneficial not only to the integration of CSR and Zoran, but
also to the development of the business of the Combined Company going forward. Dr. Gerzberg was a co-founder of Zoran in 1981 and has served as Zorans President and Chief Executive Officer since 1988 and as a director since 1981.
Dr. Gerzberg also served as Zorans President from 1981 to 1984 and as Zorans Executive Vice President and Chief Technical Officer from 1985 to 1988. Prior to co-founding Zoran, Dr. Gerzberg was Associate Director of Stanford
Universitys Electronics Laboratory.
Government and Regulatory Filings Relating to the Merger
Under the Hart-Scott-Rodino Act and the rules promulgated under that act by the Federal Trade Commission, or FTC, the
merger may not be completed until notifications have been given and information furnished to the FTC and to the Antitrust Division of the Department of Justice and the specified waiting period has been terminated or has expired. The waiting period
under the Hart-Scott Rodino Act with respect to the merger was terminated early on March 24, 2011. At any time before or after completion of the merger, the FTC or the Antitrust Division could take any action under the antitrust laws as it
deems necessary or desirable in the public interest, including seeking to enjoin completion of the merger or seeking divestiture of substantial assets of Zoran or CSR.
During or after the statutory waiting periods, and even after the completion of the merger, the Antitrust Division, the FTC or other U.K., U.S. or other governmental authorities could take any action
under antitrust and competition laws as it deems necessary or desirable in the public interest, including seeking to enjoin completion of the merger or seeking divestiture of substantial assets of Zoran or CSR. Moreover, in some jurisdictions, a
competitor, customer or other third party could initiate a private action under the antitrust or competition laws challenging or seeking to enjoin the merger, before or after it is completed. CSR and Zoran cannot be sure that a challenge to the
merger will not be made or, if a challenge is made, that CSR and Zoran will prevail.
Neither CSR nor Zoran would however be
required to agree to (i) sell, hold separate, divest, discontinue or limit, before or after the completion of the merger, any assets, businesses or interest in any assets or businesses of CSR, Zoran or any of their respective affiliates or
(ii) any conditions relating to, or changes or restrictions in, the operation of any such assets or businesses which, in either case, would reasonably be expected to result in a material adverse effect on the business of CSR and Zoran, taken
together, as expected to be conducted after the completion of the merger.
The change in the composition of Zorans
Israeli subsidiarys shareholders in connection with the merger requires under certain circumstances the approval of the Investment Center, established under the Israeli Law for the Encouragement of Capital Investment, 5719-1959, as amended,
and the Chief Scientist of the Israel Ministry of Industry, Trade and Labor under the Israeli Law for Encouragement of Research and Development in the Industry Law, 5744-1984, as amended. The approvals of the Investment Center and Chief Scientist in
connection with the merger are conditions to completion of the merger, and such approvals were already obtained or waived. Zoran obtained written approval from the Office of the Chief Scientist on March 9, 2011 and written waiver from the Investment
Center on March 28, 2011.
Except as noted above, and the filing of a certificate of merger in Delaware at or before the
effective time, neither CSR nor Zoran is aware of any material federal, state or foreign regulatory requirements or approvals required for the execution of the merger agreement or completion of the merger.
Legal Proceedings Relating to Merger
On February 23, 2011, a purported class action lawsuit was filed in Delaware Chancery Court by Judy Kauffman Goldstein, an alleged stockholder of Zoran who seeks to represent a class comprised of
Zoran
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stockholders. The complaint in this action, referred to herein as the Goldstein complaint, names as defendants Zoran, the members of Zorans board of directors as of the date of the
Goldstein complaint, CSR and Zeiss Merger Sub, Inc. The Goldstein complaint alleges that the director defendants breached fiduciary duties allegedly owed to Zoran and its stockholders by entering into the merger agreement with CSR that was announced
on February 22, 2011; that CSR and Zeiss Merger Sub, Inc. aided and abetted the alleged breaches of fiduciary duty; and that if the merger is allowed to proceed, the stockholders will suffer damages because their shares will be acquired for
less than their actual value. The plaintiff seeks an order of the Court certifying the action as a class action; rescinding the merger and/or preliminarily enjoining the defendants from consummating the merger; enjoining the defendants from taking
any further action to interfere with a consent solicitation previously commenced by Ramius Value and Opportunity Master Fund Ltd., referred to herein as Ramius, and/or awarding damages, attorneys fees and costs.
On February 25, 2011, a second purported class action was filed in the same court by Lawrence Zucker, an alleged stockholder of
Zoran, who seeks to represent the same purported class. The complaint in this action, referred to herein as the Zucker complaint, names as defendants the members of Zorans board of directors as of the date of the complaint and Zoran. The
allegations contained in the Zucker complaint are largely similar to the allegations contained in the Goldstein complaint, except that the Zucker complaint also alleges that Zoran aided and abetted alleged breaches of fiduciary duty by the director
defendants; does not name CSR or Merger Sub as defendants; and does not allege that CSR or Zeiss Merger Sub, Inc. aided or abetted any alleged breaches of fiduciary duty. The plaintiff seeks similar relief to that sought in the Goldstein complaint,
except that the Zucker complaint does not seek any relief with respect to the Ramius consent solicitation. On March 10, 2011, the Chancery Court consolidated the Goldstein and Zucker actions and designated the Goldstein complaint as the
operative complaint in the consolidated action. On May 19, 2011, an amended complaint was filed in the consolidated action. In addition to the allegations in the original complaints in the Goldstein and Zucker actions, the consolidated complaint
alleges that the registration statement filed by CSR on April 19, 2011 containing CSR and Zorans preliminary proxy statement/prospectus fails to provide Zorans stockholders with material information and provides them with materially
misleading information. The amended complaint requests the same relief as the original complaints, except that it does not request an order enjoining the defendants from taking any further action to interfere with the Ramius consent solicitation.
On March 29, 2011, a purported class action lawsuit was filed in California Superior Court, Santa Clara County by Clal
Finance Mutual Funds Corporation, an alleged stockholder of Zoran that seeks to represent a class comprised of Zoran stockholders. The complaint in this action, referred to herein as the Clal Finance complaint, names as defendants Zoran, four
members of Zorans board of directors, CSR and Zeiss Merger Sub, Inc. The Clal Finance complaint alleges that the director defendants breached fiduciary duties allegedly owed to Zoran and its stockholders by engaging in a flawed sale process
that culminated in the merger agreement with CSR that was announced on February 20, 2011; that Zoran, CSR and Zeiss Merger Sub, Inc. aided and abetted the alleged breaches of fiduciary duty; and that if the merger is allowed to proceed, the
stockholders will suffer damages because their shares will be acquired for less than their actual value. The plaintiff seeks an order of the Court certifying the action as a class action; rescinding the merger and/or preliminarily enjoining the
defendants from consummating the merger; directing the director defendants to commence a sale process designed to secure the best possible consideration for Zoran stockholders; and/or awarding damages, attorneys fees and costs. On April 29,
2011, the Court entered its order, upon the stipulation of the parties, that the defendants need not respond to the complaint in this action until and unless the plaintiff filed an amended complaint or notified the defendants that it intended not to
file an amended complaint. On May 2, 2011, counsel for the plaintiff agreed with counsel for the defendants that the California litigation would be stayed while the Delaware cases were being litigated, and that the plaintiff and its attorneys would
only request relief, if at all, through the Delaware litigation.
Appraisal Rights
Under the merger agreement, holders of shares of Zoran common stock may seek appraisal of their shares in accordance with Section 262 of
the DGCL. Zoran stockholders who seek appraisal and comply with the
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applicable requirements of the DGCL will receive, in lieu of the merger consideration, a cash payment for the fair value of their shares of Zoran common stock as determined by the Delaware Court
of Chancery (the Court of Chancery), following an appraisal proceeding. Such stockholders will not know the appraised fair value at the time they must elect whether to seek appraisal. The appraised value of the shares will not include
any value arising from the merger.
The following summary of the provisions of Section 262 of the DGCL is not a complete
statement of the provisions of that section and is qualified in its entirety by reference to the full text of Section 262 of the DGCL, a copy of which is attached as Appendix E to this proxy statement/prospectus and is incorporated into this summary
by reference.
If a holder of shares of Zoran common stock wishes to seek appraisal in connection with the merger, the holder
must:
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not vote in favor of the adoption of the merger agreement;
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continually be the holder of record of such shares of Zoran common stock through the effective time of the merger; and
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meet the conditions described below.
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Under Section 262 of the DGCL, Zoran is required to notify each of its stockholders entitled to appraisal rights that appraisal rights are available at least 20 days before the special meeting of
stockholders. This proxy statement/prospectus constitutes Zorans notice to holders of Zoran common stock of their right to exercise appraisal rights. Failure to comply with the procedures set forth in Section 262 of the DGCL in a timely and
proper manner will result in the loss of appraisal rights.
ALL REFERENCES IN THIS SUMMARY AND IN SECTION 262 OF THE DGCL TO A
STOCKHOLDER OR TO A HOLDER OF SHARES OF ZORAN COMMON STOCK ARE REFERENCES TO THE RECORD HOLDERS OF ZORAN COMMON STOCK. A PERSON HAVING A BENEFICIAL INTEREST IN ZORAN COMMON STOCK HELD OF RECORD IN THE NAME OF ANOTHER PERSON,
SUCH AS A BROKER OR NOMINEE, MUST ACT PROMPTLY TO CAUSE THE RECORD HOLDER TO FOLLOW THE STEPS SUMMARIZED BELOW PROPERLY AND IN A TIMELY MANNER TO PERFECT THE HOLDERS APPRAISAL RIGHTS.
Because a duly executed proxy that does not contain voting instructions will, unless revoked, be voted for the adoption of the merger
agreement, a holder of shares of Zoran common stock who votes by proxy and who wishes to exercise appraisal rights must vote against adoption of the merger agreement or abstain from voting on the approval and adoption of the merger agreement. A vote
against the adoption of the merger agreement or an abstention will not constitute a demand for appraisal. Holders of Zoran common stock wishing to exercise the right to dissent from the transaction and seek an appraisal of their shares must take the
following actions:
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not vote in favor of the adoption of the merger agreement, or vote against the adoption of the merger agreement or abstain from voting;
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file a written notice with Zoran of their intention to exercise rights of appraisal of their shares before the Zoran special meeting;
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follow the procedures set forth in Section 262 of the DGCL; and
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not accept the general merger consideration.
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Voting for the adoption of the merger agreement will constitute a waiver of your appraisal rights.
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A ZORAN STOCKHOLDER WHO ELECTS TO EXERCISE APPRAISAL RIGHTS UNDER SECTION 262 OF THE
DGCL MUST MAIL OR DELIVER, BEFORE THE MERGER AGREEMENT IS VOTED UPON AT THE ZORAN SPECIAL MEETING, A WRITTEN DEMAND TO: ZORAN CORPORATION, ATTN: CORPORATE SECRETARY, 1390 KIFER ROAD, SUNNYVALE, CALIFORNIA 94086-5305.
A demand for appraisal must be executed by or on behalf of the holder of record and must reasonably inform Zoran of the identity of the
stockholder of record. The demand must also state that the Zoran stockholder intends to demand appraisal of the holders Zoran common stock in connection with the merger. If the shares of Zoran common stock are owned of record by more than one
person, as in a joint tenancy and tenancy in common, the demand must be executed by or for all joint owners. An authorized agent, including an agent for two or more joint owners, may execute the demand for appraisal for a stockholder of record;
however, the agent must identify the record owner or owners and expressly disclose the fact that, in executing the demand, the agent is agent for the owner or owners.
The shares of Zoran common stock with respect to which holders have perfected their appraisal rights in accordance with Section 262 of the DGCL and have not effectively withdrawn or lost their appraisal
rights are referred to in this proxy statement/prospectus as the dissenting shares.
Within ten days after the
effective date of the merger, the surviving corporation must mail a notice to all former Zoran stockholders who filed a written notice of their intention to exercise appraisal rights in compliance with Section 262 of the DGCL notifying those former
Zoran stockholders of the effective date of the merger.
Within 120 days after the date the merger becomes effective, but not
thereafter, the surviving corporation or any former holder of shares of Zoran common stock who has complied with Section 262 of the DGCL and is entitled to appraisal rights under Section 262 of the DGCL may file a petition in the Court of Chancery
with a copy served on the surviving corporation in the case of a petition filed by a former Zoran stockholder, demanding a determination of the fair value of the Zoran common stock of all such Zoran stockholders. The surviving corporation will have
no obligation to file a petition, and the surviving corporation has no present intention to cause such a petition to be filed. Accordingly, it is the obligation of Zoran stockholders seeking appraisal rights to initiate all necessary action to
perfect appraisal rights within the time prescribed in Section 262 of the DGCL.
Within 120 days after the merger becomes
effective, any holder of shares of Zoran common stock who has complied with the requirements for exercise of appraisal rights under Section 262 of the DGCL will be entitled, upon written request, to receive from the surviving corporation, a
statement setting forth the aggregate number of shares of Zoran common stock not voted in favor of the approval and adoption of the merger agreement and with respect to which demands for appraisal have been received and the total number of holders
of these shares of Zoran common stock. If a holder of shares of Zoran common stock timely files a petition for an appraisal, the Court of Chancery is empowered to conduct a hearing on this petition to determine those holders who have complied with
Section 262 of the DGCL and who have become entitled to appraisal rights thereunder. The Court of Chancery may require the holders of shares of Zoran common stock who demanded appraisal of their shares to submit their stock certificates to the
Register in Chancery of the Court of Chancery for notation of the pending appraisal proceeding. If any Zoran stockholder fails to comply with its direction, the Court of Chancery may dismiss the proceedings as to such stockholder.
After determining the holders entitled to appraisal, the Court of Chancery will appraise the fair value of the shares of
Zoran common stock held by such holders, exclusive of any element of value arising from the accomplishment or expectation of the transaction, together with a fair rate of interest, if any, to be paid upon the amount determined to be the fair value.
Zoran stockholders considering seeking appraisal should be aware that the fair value of shares of Zoran common stock, as determined in an appraisal proceeding under Section 262 of the DGCL, could be more than, the same as or less than the value of
the merger consideration they would receive under the merger agreement if they did not seek appraisal of their shares of Zoran common stock, and that investment banking opinions as to the fairness from a financial point of view of the consideration
payable in a
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sale transaction are not opinions as to fair value under Section 262 of the DGCL. Additionally, Zoran stockholders considering seeking appraisal should be aware there can be no certainty as to
the time required for such proceedings.
The Court of Chancery may determine the cost of the appraisal action and may allocate
the costs among the parties as the court deems equitable. However, costs do not include attorneys and expert witness fees. Each party must bear its own expenses of the proceeding, although the court may order that all or a portion of the
expenses incurred by any stockholder in connection with an appraisal, including, without limitation, reasonable attorneys fees and the fees and expenses of experts utilized in the appraisal proceeding, be charged pro rata against the value of
all of the shares of Zoran common stock entitled to an appraisal.
Any holder of shares of Zoran common stock who duly demands
appraisal in compliance with Section 262 of the DGCL will not, after the date the merger becomes effective, be entitled to vote its shares of Zoran common stock for any purpose or be entitled to the payment of dividends or other distributions on
those shares other than dividends or other distributions payable to holders of record as of a record date prior to the effective date of the merger.
If any Zoran stockholder who demands appraisal of shares of Zoran common stock under Section 262 of the DGCL fails to perfect, or effectively withdraws or loses, its right to appraisal, the shares of such
stockholder will be converted into the right to receive the merger consideration under the merger agreement, without interest.
A Zoran stockholder will lose the right to appraisal if such stockholder does not file a petition for appraisal within 120 days after the
date the merger becomes effective, or if such holder delivers to Zoran a written withdrawal of a demand for appraisal and an acceptance of the merger consideration. However, any attempt to withdraw a demand for appraisal made more than 60 days after
the date the merger becomes effective will require the written approval of Zoran and, once a petition for appraisal is filed, an appraisal proceeding may not be dismissed as to any Zoran stockholder absent court approval. Furthermore, dissenting
shares lose their status as dissenting shares if the transaction is abandoned or the holder of such shares fails to make a timely written demand for appraisal.
Failure to follow the procedures required by Section 262 of the DGCL for perfecting appraisal rights is likely to result in the loss of appraisal rights. If a holder of dissenting shares withdraws its
demand for appraisal or has its appraisal rights terminated as described above, such holder will only be entitled to receive the merger consideration for those shares pursuant to the terms of the merger agreement.
Appraisal rights are available only to the record holders of shares. If you wish to exercise appraisal rights but have a beneficial
interest in shares held of record by or in the name of another person, such as a broker, bank or nominee, you should act promptly to cause the record holder to follow the procedures set forth in Section 262 of DGCL to perfect your appraisal rights.
In view of the complexity of Section 262 of the DGCL, Zoran stockholders who may wish to dissent from the merger and
pursue appraisal rights should contact their legal advisors.
Accounting Treatment
CSR will account for the merger as an acquisition under IFRS No. 3 (2008),
Business Combinations
, as issued by the IASB. Under
the acquisition method, CSR will be required to record on its consolidated balance sheet the assets and liabilities acquired at their fair values on the completion date of the merger.
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THE MERGER AGREEMENT
Zoran, CSR and a wholly-owned merger subsidiary of CSR entered into merger agreement as of February 20, 2011, which is referred
to herein as the original merger agreement. As of June 16, 2011, the parties thereto executed a new agreement amending and restating the original merger agreement. All references in this proxy statement/prospectus to the merger agreement
refer to the amended and restated merger agreement executed as of June 16, 2011, unless otherwise indicated.
The
following discussion summarizes material provisions of the merger agreement, a complete copy of which is attached as Appendix A to this proxy statement/prospectus and is incorporated by reference into this proxy statement/prospectus. The rights
and obligations of the parties are governed by the express terms and conditions of the merger agreement and not by this summary or any other information contained in this proxy statement/prospectus. Zoran stockholders are urged to read the merger
agreement carefully and in its entirety.
The merger agreement is described in this proxy statement/prospectus only to
provide you with information regarding its terms and conditions, and not to provide any other factual information regarding CSR, Zoran or their respective businesses. The representations, warranties and covenants contained in the merger agreement:
(i) were made only for purposes of the merger agreement and as of the specific dates set forth therein; (ii) were solely for the benefit of the parties to the merger agreement; (iii) are subject to limitations agreed upon by the
parties, including being qualified by confidential disclosures made for the purposes of allocating contractual risk between the parties to the merger agreement instead of establishing these matters as facts; and (iv) may be subject to standards
of materiality applicable to the contracting parties that differ from those applicable to investors. Investors should not rely on the representations, warranties and covenants or any description thereof as characterizations of the actual state of
facts or condition of CSR, Zoran or Zeiss Merger Sub, Inc., or any of their respective subsidiaries or affiliates. Moreover, information concerning the subject matter of the representations, warranties and covenants may change after the date of the
merger agreement, which subsequent information may or may not be fully reflected in public disclosures by CSR and Zoran. Accordingly, you should not rely on the representations, warranties and covenants in the merger agreement as characterizations
of the actual state of facts about CSR or Zoran, and you should read the information provided elsewhere in this proxy statement/prospectus for information regarding CSR and Zoran and their respective businesses. See Where You Can Find More
Information.
Terms of the Merger; Merger Consideration
Each of Zorans board of directors and CSRs board of directors has approved the merger agreement, which provides for the merger
of Zeiss Merger Sub, Inc., a wholly owned subsidiary of CSR, with and into Zoran. Zoran will be the surviving corporation in the merger and will become a wholly owned subsidiary of CSR. Each share of Zoran common stock issued and outstanding
immediately prior to the completion of the merger (except for shares held by CSR, Zoran or their respective wholly-owned subsidiaries and except for dissenting shares) will be converted into the right to receive a combination of $6.26 in cash in
United States dollars, without interest, plus 0.14725 of a CSR ADS (which is equivalent to 0.589 CSR ordinary shares). If the number of CSR ADSs or shares of Zoran common stock changes before the merger is completed because of a share dividend or
other distribution payable in CSR ordinary shares, CSR ADSs or Zoran common stock or because of a share or stock split, reverse share or stock split, reclassification, combination or other similar change, then an equitable adjustment will be made to
the number of CSR ordinary shares into which each share of Zoran common stock will be converted.
CSR will not issue any
fractional CSR ADSs in the merger. Instead, Zoran stockholders will receive cash (without interest) for any fractional CSR ADSs that they might otherwise receive in the merger. The amount of the cash payment to each Zoran stockholder will either
(a) represent a proportionate interest in the net proceeds from the sale on The NASDAQ Stock Market of the aggregate of the fractional CSR ADSs that would otherwise have been issued as merger consideration or (b) be paid by CSR based on
the closing price of a CSR ADS on The NASDAQ Stock Market on the first business day following the date the merger becomes effective.
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At the effective time of the merger, Zorans certificate of incorporation will be
amended and restated in the form attached to the merger agreement, and will be the certificate of incorporation of the surviving corporation after completion of the merger.
Treatment of Zoran Stock Options and Other Equity-Based Awards
The merger agreement provides that each option to acquire shares of Zoran common stock outstanding immediately prior to the effective time of the merger and issued under any Zoran option plans will be
assumed by CSR and converted by virtue of the merger and without any action on the part of the holder of that Zoran stock option, into an option exercisable for, at the election of CSR, either CSR ADSs or CSR ordinary shares.
The number of CSR ADSs into which such new option will be exercisable will be equal to the product obtained by multiplying the aggregate
number of shares of Zoran common stock for which such Zoran stock option was exercisable by the option ADS exchange ratio (rounded down to the nearest whole share).
Option ADS exchange ratio means the sum of 0.14725 plus the quotient obtained by dividing:
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the product of $6.26 multiplied by the conversion rate, by
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(ii)
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the product of four multiplied by the volume weighted average price for a CSR ordinary share, rounded to the nearest one-tenth of a pence, as reported on the London
Stock Exchanges main market for listed securities on the trading day immediately prior to the effective time of the merger.
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Conversion rate means the exchange rate of British pounds sterling for one U.S. dollar as reported by Bloomberg at 4:00 p.m. Eastern time on the trading day immediately prior to the effective
time of the merger.
The number of CSR ordinary shares into which such new option will be exercisable will be equal to the
product obtained by multiplying the aggregate number of shares of Zoran common stock for which such Zoran stock option was exercisable by the option ordinary share exchange ratio (rounded down to the nearest whole share).
Option ordinary share exchange ratio means the sum of 0.589 plus the quotient obtained by dividing:
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(i)
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the product of $6.26 multiplied by the conversion rate, by
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(ii)
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the volume weighted average price for a CSR ordinary share, rounded to the nearest one-tenth of a pence, as reported on the London Stock Exchanges main market for
listed securities on the trading day immediately prior to the effective time of the merger.
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All converted stock
options held by persons who are not residents of Europe or India shall be exercisable for CSR ADSs unless otherwise agreed by CSR and Zoran.
The new exercise price per share of such converted Zoran stock option shall be equal to:
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in the case of converted stock options exercisable for CSR ADSs, the per share exercise price of such Zoran stock option immediately prior to the
effective time of the merger divided by the option ADS exchange ratio, rounded up to the nearest cent; and
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in the case of converted stock options exercisable for CSR ordinary shares, the product of the conversion rate multiplied by the per share exercise
price of such Zoran stock option immediately prior to the effective time of the merger divided by the option ordinary share exchange ratio, rounded up to the nearest pence.
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The merger agreement further provides that each restricted stock unit with respect to shares of Zoran common stock granted under a Zoran
option plan that is outstanding immediately prior to the effective time of
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the merger will, by virtue of the merger and without any action on the part of the holder thereof, be converted into a restricted stock unit, on the same terms and conditions (including
applicable vesting requirements and deferral provisions) as applied to each such Zoran RSU immediately prior to the effective time of the merger, representing, at the election of CSR, either CSR ADSs or CSR ordinary shares.
With respect to new restricted stock units for CSR ADSs, the number of CSR ADSs underlying such new restricted stock unit will be equal
to the number of shares of Zoran common stock subject to the Zoran restricted stock unit immediately prior to the effective time of the merger multiplied by the option ADS exchange ratio, rounded to the nearest whole share.
With respect to new restricted stock units for CSR ordinary shares, the number of CSR ordinary shares underlying such new restricted
stock unit will be equal to the number of shares of Zoran common stock subject to the Zoran restricted stock unit immediately prior to the effective time of the merger multiplied by option ordinary share exchange ratio, rounded to the nearest whole
share. All converted CSR restricted stock units held by persons who are not residents of Europe or India shall be with respect to CSR ADSs unless otherwise agreed by CSR and Zoran.
The Zoran employee stock purchase plan will be terminated immediately prior to the effective time of the merger. Each outstanding right
to purchase shares of Zoran common stock under any outstanding offering period as of the date of the merger agreement under the Zoran employee stock purchase plan will terminate at least one day prior to the effective time of the merger. Upon that
termination, Zoran may permit each participant in the Zoran employee stock purchase plan to purchase as many whole shares of Zoran common stock as the balance of the participants account will allow, at the price determined under the Zoran
employee stock purchase plan for each such outstanding offering period, and any amounts remaining in any participants account at the effective time of the merger will be refunded to the participant.
Closing and Effective Time of the Merger
The parties are obligated to consummate the merger only if all of the conditions to the merger (described below under The Merger
AgreementConditions to the Closing of the Merger) are either satisfied or waived.
The merger will become
effective when a certificate of merger is filed with the Secretary of State of the State of Delaware. In the merger agreement, CSR and Zoran have agreed to cause the closing of the merger to occur on the second business day following the
satisfaction or waiver of the last of the conditions specified in the merger agreement (other than those conditions which by their nature are to be satisfied on the date the merger is to be consummated), or on another mutually agreed date. It
currently is anticipated that the effective time of the merger will occur during the third quarter of 2011.
Conversion of Shares; Exchange of Certificates
The conversion of each share of Zoran common stock into the merger consideration, as described above under The Merger
AgreementTerms of the Merger; Merger Consideration, will occur automatically at the completion of the merger. Before the consummation of the merger, CSR will engage an exchange agent reasonably acceptable to Zoran to handle the exchange
of Zoran common stock certificates for the merger consideration and to perform other duties as outlined in the merger agreement.
Letter of Transmittal
Promptly after the consummation of the merger (and in any event within 10 business days),
the exchange agent will send a transmittal letter to each person who held shares of Zoran common stock at the effective time of the merger. This mailing will contain instructions on how to surrender Zoran common stock certificates or book-entry
shares in exchange for statements indicating book-entry ownership of CSR ADSs and a check in the
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amount representing the cash portion of the merger consideration plus any cash to be paid instead of fractional ADSs. If a holder of a Zoran stock certificate or Zoran book-entry shares makes a
special request, CSR will issue to the requesting holder a physical CSR American depositary receipt in lieu of book-entry shares. When you deliver your Zoran stock certificates to the exchange agent along with a properly executed letter of
transmittal and any other required documents, your Zoran stock certificates will be cancelled and you will receive statements indicating book-entry ownership of CSR ADSs, or, if requested, a physical CSR American depositary receipt representing the
number of CSR ADSs to which you are entitled under the merger agreement. You also will receive a cash payment for any fractional CSR ADSs that you would otherwise have been entitled to as a result of the merger.
You should not submit your Zoran stock certificates for exchange until you receive the transmittal instructions and a form of letter of
transmittal from the exchange agent.
If a certificate for Zoran common stock has been lost, stolen or destroyed, the exchange
agent will issue the consideration properly payable under the merger agreement upon receipt of an affidavit from the stockholder attesting to that loss, theft or destruction.
After the consummation of the merger, there will be no further transfers on the stock transfer books of Zoran (except as required to settle trades executed prior to completion of the merger).
Appraisal Rights
Record holders of Zoran common stock who do not vote in favor of the proposal to adopt the merger agreement and otherwise comply with the requirements and procedures of Section 262 of the DGCL are
entitled to exercise their rights of appraisal, which generally entitle stockholders to receive a cash payment equal to the fair value of their Zoran common stock in connection with the merger. A detailed description of the appraisal rights and
procedures available to Zoran stockholders is included in The MergerAppraisal Rights beginning on page 104. The full text of Section 262 of the DGCL is attached as Appendix E to this proxy statement/prospectus.
Withholding
CSR, Zoran and the exchange agent will be entitled to deduct and withhold the amounts they are required to deduct and withhold under any federal, state, local or foreign tax law. If CSR, Zoran or the
exchange agent withholds any amounts, these amounts will be treated for all purposes of the merger as having been paid to the stockholders from whom they were withheld.
Dividends and Distributions
While CSR
has not historically paid regular dividends or other distributions, at the CSR annual general meeting held on May 18, 2011, CSR shareholders approved the CSR board of directors proposal to pay CSRs first dividend of £0.04 ($0.065,
based on the exchange rate on June 3, 2011) per share in respect of the 2010 financial year, representing two-thirds of a notional £0.06 ($0.098, based on the exchange rate on June 3, 2011) full year dividend that would have been paid if
CSR had commenced payment of dividends sooner. The dividend was paid on June 3, 2011 to CSR shareholders of record on May 13, 2011. CSR shareholders of record as of August 19, 2011 will be entitled to receive CSRs next dividend
payment. Because the merger will not close on or prior to that date, Zoran stockholders will not participate in the dividend.
It is the CSR board of directors intention to follow a progressive dividend policy that reflects the underlying growth prospects of
CSR, as well as the long term outlook for growth in earnings per share and group cash flow. The CSR board of directors intends to pay dividends on a semi-annual basis. If any dividend or other distribution is declared after the merger is completed
with respect to CSR ADSs into which shares of Zoran common stock have been converted, until Zoran common stock certificates have been surrendered for exchange (or Zoran book-entry shares have been properly transferred), the dividend or distribution
will accrue but will not
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be paid. CSR will pay, or cause the depositary to pay, any unpaid dividends or other distributions, without interest, to former Zoran stockholders only after they have duly surrendered their
Zoran stock certificates.
Zoran does not pay regular dividends or other distributions.
Representations and Warranties of CSR and Zoran to Each Other
The merger agreement contains representations and warranties made by Zoran and CSR to, and solely for the benefit of, each other. The
assertions embodied in the representations and warranties contained in the merger agreement are qualified by information in confidential disclosure letters provided by the parties to each other in connection with the signing of the merger agreement.
While Zoran does not believe that these disclosure letters contain information that the securities laws require the parties to publicly disclose, other than information that has already been so disclosed, they do contain information that modifies,
qualifies and creates exceptions to the representations and warranties of the parties set forth in the merger agreement. You should not rely on the representations and warranties in the merger agreement as characterizations of the actual state of
facts about Zoran or CSR, since they were only made as of the date of the merger agreement and are modified in important part by the underlying disclosure letters. Moreover, certain representations and warranties in the merger agreement were used
for the purpose of allocating risk between Zoran and CSR rather than establishing matters as facts. Finally, information concerning the subject matter of the representations and warranties may have changed since the date of the merger agreement,
which subsequent information may or may not be fully reflected in the companies public disclosures.
The merger
agreement contains customary representations and warranties made by CSR and Zoran relating to their respective businesses regarding, among other things:
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corporate matters, including organization and power to conduct its business, foreign qualifications, corporate authorizations, enforceability,
organizational documents and subsidiaries;
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authority relative to execution, delivery and performance of the merger agreement by Zoran and the absence of contraventions or conflicts with
Zorans organizational documents as a result of the merger;
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required governmental authorizations;
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options, stock-based awards and warrants;
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the timely filing of reports with governmental entities;
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financial statements, internal controls and accounting;
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the absence of material adverse changes;
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employee benefit plans and labor relations;
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taxes and tax treatment of the merger;
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intellectual property and real and personal property;
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required permits and compliance with applicable laws;
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broker, finder and investment banker fees payable in connection with the merger;
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compliance with its respective obligations under the original merger agreement; and
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information supplied for inclusion in this proxy statement/prospectus and other similar documents.
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The representations and warranties in the merger agreement do not survive the effective time of the merger.
Zorans representations and warranties are qualified by the information included in (a) Zorans confidential disclosure
letter delivered to CSR as the date of the merger agreement and (b) Zorans public reports filed with the SEC on or after January 1, 2008 and prior to February 18, 2011, excluding any risk factor or forward-looking statement
disclosure in such reports and excluding any information in Zorans 2010 unaudited condensed financial statements included in Zorans current report on Form 8-K furnished to the SEC on February 3, 2011.
CSRs representations and warranties are qualified by the information included in (a) CSRs confidential disclosure letter
delivered to Zoran on the date of the original merger agreement and (b) CSRs circulars, notices, prospectuses, resolutions, reports and other documents to which the listing rules, disclosure rules and transparency rules and/or the
prospectus rules made by the U.K. Listing Authority apply, and CSRs public reports filed with the SEC, in each case filed, issued or otherwise made publicly available after January 1, 2008 and prior to February 18, 2011, excluding
any risk factor or forward looking statement disclosure in such reports and excluding any information in the audited consolidated financial statements of CSR and its consolidated subsidiaries for the period ended January 1, 2011.
Restrictions on Zorans Business Pending the Merger
Under the merger agreement, Zoran has agreed that it will conduct its business in the ordinary course consistent with past practice and
use commercially reasonable efforts to maintain and preserve intact its business organization, to retain the services of its current officers and key employees, and to preserve the goodwill of its customers, suppliers and others with whom it has
business relationships.
In particular, Zoran has agreed on behalf of itself and its subsidiaries to certain restrictions in
its and their ability to, among other things:
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amend its organizational documents;
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declare or pay any dividends and distributions on its capital stock;
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make adjustments to its capital stock;
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acquire its own capital stock or grant rights to acquire its capital stock;
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issue shares other than pursuant to existing option and equity incentive plans;
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enter into voting agreements regarding its capital stock;
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increase or pay compensation and benefits not required by any existing plan or arrangement, except as consistent with past practice, or grant severance
or termination pay, to its directors, officers and employees other than pursuant to existing plans;
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establish or accelerate rights under any benefit plans;
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sell, license or transfer assets other than in the ordinary course of business;
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enter into, terminate or amend certain material contracts other than, in certain cases, in the ordinary course of business;
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incur indebtedness on behalf of itself or any other person other than in the ordinary course of business;
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make loans to or investments in other persons other than in the ordinary course of business;
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make loans to its directors or officers;
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make capital expenditures in excess of Zorans actual capital expenditures in 2010;
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change its accounting policies or procedures other than as required by U.S. GAAP;
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take certain actions with respect to its intellectual property.
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These restrictions, which are subject to various exceptions and qualifications agreed by CSR and Zoran, are described in more detail in
the merger agreement. Among the exceptions to the restrictions described above include an agreement that Zoran may issue (i) Zoran stock options in respect of 1,800,000 shares of Zoran common stock and (ii) Zoran RSUs in respect of up to 800,000
shares of Zoran common stock. In addition, some of the restrictions on Zorans business are qualified by confidential disclosures made by Zoran to CSR.
Restrictions on CSRs Business Pending the Merger
Under the merger agreement, CSR has agreed that it will use commercially reasonable efforts to maintain and preserve intact its business organization, to retain the services of its current officers and
key employees, and to preserve the good will of its customers, suppliers and others with whom it has business relationships and refrain from taking any action that would reasonably be expected to materially diminish the value of its business.
In particular, CSR has agreed on behalf of itself and its subsidiaries to certain restrictions in its and their ability to:
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amend its articles of association;
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declare dividends and distributions on its share capital;
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make adjustments to its share capital;
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acquire its own share capital or grant rights to acquire its share capital;
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issue shares other than pursuant to the existing share option plans;
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enter into voting agreements regarding its share capital;
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increase or pay compensation and benefits other than pursuant to existing plans or arrangements, or grant severance or termination pay, to its
directors, officers and employees other than pursuant to existing policies;
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establish or accelerate rights under its benefit plans;
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make acquisitions that would prevent, impede or delay the merger; and
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sell, license or transfer assets to the extent such action would prevent, impede or delay the merger.
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These restrictions, which are subject to various exceptions and qualifications agreed by CSR and Zoran, are described in more detail in
the merger agreement. Among the exceptions to the restrictions described above include an agreement that CSR may (i) issue CSR share options in respect of up to 500,000 CSR ordinary shares, (ii) issue contingent share awards in respect of up to
2,700,000 CSR ordinary shares and (iii) buy back up to 10 million of the outstanding CSR ordinary shares in a manner consistent with past practice. On March 14, 2011, Zoran consented to allow CSR to issue CSR share options or contingent share awards
in respect of up to an additional 300,000 CSR ordinary shares. In addition, some of the restrictions on CSRs business are qualified by confidential disclosures made by CSR to Zoran.
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Zorans Agreement Not to Solicit Other Offers
Zoran has agreed that it will not, directly or indirectly:
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solicit, initiate, knowingly facilitate or knowingly encourage any inquiries, offers or proposals relating to a takeover proposal for
Zoran, as described below;
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discuss or negotiate with, or furnish non-public information to, any person that has made or indicated an intention to make a takeover proposal for
Zoran;
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withdraw, modify, qualify or amend the recommendation of Zorans board of directors in favor of the merger in any manner adverse to CSR;
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approve, endorse or recommend any takeover proposal for Zoran;
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enter into any contract relating to a takeover proposal for Zoran (other than a confidentiality agreement); or
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agree to or publicly propose to do any of the foregoing.
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Zoran has agreed (i) to cease any solicitations, discussions or negotiations existing as of the date of the merger agreement with any person that, prior to such date, had made or indicated an
intention to make a takeover proposal for Zoran, as described below, and (ii) to provide CSR prompt notice upon receipt of any takeover proposal for Zoran or request for non-public information relating to Zoran in
connection with a takeover proposal for Zoran. Zoran further agreed that any violation of its obligations not to solicit other offers as set forth in the original merger agreement would constitute a violation of the merger agreement.
However, until Zoran stockholders vote to adopt the merger agreement, Zoran may:
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engage in discussions and negotiations with a person who has made a bona fide unsolicited takeover proposal and furnish non-public information to that
person pursuant to a confidentiality agreement having terms and conditions substantially equivalent to those contained in its confidentiality agreement with CSR if Zorans board of directors has determined in good faith, after consultation with
its financial advisor and outside legal counsel, that the takeover proposal either is, or would be reasonably likely to lead to, a superior proposal, as described below;
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in response to a bona fide unsolicited takeover proposal, withdraw, modify, qualify or amend, in a manner adverse to CSR, the
recommendation of Zorans board of directors in favor of the merger if Zorans board of directors has (i) after consultation with Zorans financial advisor and outside legal counsel, determined in good faith that such
takeover proposal constitutes a superior proposal, as described below, (ii) after consultation with Zorans outside legal counsel, determined in good faith that failure to take such action would be inconsistent with
the fiduciary and other duties of its directors, (iii) provided CSR with three business days prior written notice, (iv) if so requested by CSR, negotiated with CSR and its advisors regarding potential amendments to the merger
agreement, and (v) following such three business day period, after consultation with Zorans financial advisor and outside legal counsel, determined in good faith that such takeover proposal continued to constitute a
superior proposal and that the failure to take such action would continue to be inconsistent with the fiduciary and other duties of its directors; or
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in the absence of a takeover proposal, withdraw, modify, qualify or amend, in a manner adverse to CSR, the recommendation of Zorans
board of directors in favor of the merger, if (i) Zorans board of directors has, after consultation with Zorans outside legal counsel, determined in good faith that the failure to take such action would be inconsistent with the
fiduciary and other duties of its directors and (ii) Zoran has provided CSR with three business days prior written notice.
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The merger agreement provides that the term takeover proposal, when used in relation to Zoran, means any indication of interest, proposal or offer from any person relating to (i) a direct
or indirect acquisition, in one transaction or a series of related transactions, of assets (including equity securities of any subsidiary of Zoran) or
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businesses of Zoran or its subsidiaries that generate or constitute individually or in the aggregate, 20% or more of the consolidated net revenues, net income or assets of Zoran and its
subsidiaries for the year ended December 31, 2010, (ii) the issuance to any person or group of persons acting in concert of 50% or more of any class of equity capital of Zoran, (iii) any tender or exchange offer that, if consummated,
would result in any person or group beneficially owning 50% or more of any class of equity capital of Zoran or (iv) any merger, consolidation, business combination, share exchange or similar transaction, in one transaction or a series of
related transactions, involving Zoran or any of its significant subsidiaries that would result in any persons or groups (including the shareholders of a person party to such transaction) beneficially owning 50% or more of any class of equity capital
of Zoran, the surviving company or the resulting parent company of Zoran, in each case other than the merger.
The merger
agreement provides that the term superior proposal when used with respect to Zoran means any bona fide written takeover proposal that, if consummated, would result in a person or group owning, directly or indirectly, more than 80% of
Zoran common stock then outstanding (or of the shares of the common stock of the surviving entity in a merger or the ultimate parent of the surviving entity in a merger) or more than 80% of the assets of Zoran and its subsidiaries and which the
board of directors of Zoran determines in good faith (after consultation with its legal counsel and financial advisor) to be more favorable to Zoran stockholders from a financial point of view than the transactions contemplated by the merger
agreement, taking into consideration the conditions to the consummation of the takeover proposal and the financial, legal, regulatory and other aspects of the takeover proposal.
In addition, Zoran has the ability to terminate the merger agreement in certain circumstances, as described below under The Merger
AgreementTermination Events.
CSRs Agreement Not to Solicit Other Offers
CSR has agreed that it will not, directly or indirectly:
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solicit, initiate, knowingly facilitate or knowingly encourage any inquiries, offers or proposals relating to a takeover proposal for CSR,
as described below;
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discuss or negotiate with, or furnish non-public information to, any person that has made or indicated an intention to make a takeover proposal for
CSR;
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withdraw, modify, qualify or amend the recommendation of CSRs board of directors in favor of the merger in any manner adverse to Zoran;
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approve, endorse or recommend any takeover proposal for CSR;
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enter into any contract relating to a takeover proposal for CSR (other than a confidentiality agreement); or
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agree to or publicly propose to do any of the foregoing.
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CSR has agreed (i) to cease any solicitations, discussions or negotiations existing as of the date of the merger agreement with any person that, prior to such date, had made or indicated an intention
to make a takeover proposal for CSR, as described below, and (ii) to provide Zoran prompt notice upon receipt of any takeover proposal for CSR or request for non-public information relating to CSR in connection with a
takeover proposal for CSR. CSR further agreed that any violation of its obligations not to solicit other offers as set forth in the original merger agreement would constitute a violation of the merger agreement.
However, until CSR shareholders vote to approve the merger, CSR may:
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engage in discussions and negotiations with a person who has made a bona fide unsolicited takeover proposal and furnish non-public information to that
person pursuant to a confidentiality agreement having terms and conditions substantially equivalent to those contained in its confidentiality agreement
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with Zoran if CSRs board of directors has determined in good faith, after consultation with its financial advisor and outside legal counsel, that the takeover proposal either is, or would
be reasonably likely to lead to, a superior proposal, as described below;
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in response to a bona fide unsolicited takeover proposal, withdraw, modify, qualify or amend, in a manner adverse to Zoran, the
recommendation of CSRs board of directors in favor of the merger if CSRs board of directors has (i) after consultation with CSRs financial advisor and outside legal counsel, determined in good faith that such takeover
proposal constitutes a superior proposal, as described below, (ii) after consultation with CSRs outside legal counsel, determined in good faith that failure to take such action would be inconsistent with the fiduciary
and other duties of its directors, (iii) provided Zoran with three business days prior written notice, (iv) if so requested by Zoran, negotiated with Zoran and its advisors regarding potential amendments to the merger agreement, and
(v) following such three business day period, after consultation with CSRs financial advisor and outside legal counsel, determined in good faith that such takeover proposal continued to constitute a superior
proposal and that the failure to take such action would continue to be inconsistent with the fiduciary and other duties of its directors; or
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in the absence of a takeover proposal, withdraw, modify, qualify or amend, in a manner adverse to Zoran, the recommendation of CSRs
board of directors in favor of the merger, if (i) CSRs board of directors has, after consultation with CSRs outside legal counsel, determined in good faith that the failure to take such action would be inconsistent with the
fiduciary and other duties of its directors and (ii) CSR has provided Zoran with three business days prior written notice.
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The merger agreement provides that the term takeover proposal, when used in relation to CSR, means any indication of interest, proposal or offer from any person relating to (i) a direct
or indirect acquisition, in one transaction or a series of related transactions, of assets (including equity securities of any subsidiary of CSR) or businesses of CSR or its subsidiaries that generate or constitute individually or in the aggregate,
20% or more of the consolidated net revenues, net income or assets of CSR and its subsidiaries for the year ended December 31, 2010, (ii) the issuance to any person or group of persons acting in concert of 50% or more of any class of
equity capital of CSR, (iii) any tender or exchange offer that, if consummated, would result in any person or group beneficially owning 50% or more of any class of equity capital of CSR or (iv) any merger, consolidation, business
combination, share exchange or similar transaction, in one transaction or a series of related transactions, involving CSR or any of its significant subsidiaries that would result in any persons or groups (including the shareholders of a person party
to such transaction) beneficially owning 50% or more of any class of equity capital of CSR, the surviving company or the resulting parent company of CSR, in each case other than the merger.
The merger agreement provides that the term superior proposal when used with respect to CSR means any bona fide written
takeover proposal that, if consummated, would result in a person or group owning, directly or indirectly, more than 80% of CSR common stock then outstanding (or of the shares of the common stock of the surviving entity in a merger or the ultimate
parent of the surviving entity in a merger) or more than 80% of the assets of CSR and its subsidiaries and which the board of directors of CSR determines in good faith (after consultation with its legal counsel and financial advisor) to be more
favorable to CSR shareholders from a financial point of view than the transactions contemplated by the merger agreement, taking into consideration the conditions to the consummation of the takeover proposal and the financial, legal, regulatory and
other aspects of the takeover proposal.
In addition, CSR has the ability to terminate the merger agreement in certain
circumstances, as described below under The Merger AgreementTermination Events.
CSR
Shareholder Meeting; CSRs Shareholder Circular and Prospectus
In order to consummate the merger, CSR must obtain
the affirmative vote of a majority of CSR shareholders (or their proxies, if applicable) as (being entitled to do so) are present and vote or, in the case of a vote taken on a poll, the affirmative vote by CSR shareholders or their proxies
representing a majority of the CSR ordinary
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shares in respect of which votes are validly exercised, in relation to (i) the transactions contemplated by the merger agreement and (ii) the allotment of CSR ordinary shares underlying
the CSR ADSs to be issued in the merger to Zoran stockholders and any CSR ADSs to be issued pursuant to the exercise of Zoran stock options and other equity-based awards (see above, The Merger AgreementTreatment of Zoran Stock Options
and Other Equity-Based Awards) in accordance with the U.K. Companies Act 1985 (the Companies Act 1985), the U.K. Companies Act 2006 (the Companies Act 2006, and collectively the Companies Acts) and the
listing rules made by the U.K. Listing Authority under Part VI of the U.K. Financial Services and Markets Act 2000.
CSR
has agreed to hold a meeting of its shareholders in order to obtain this approval. Under the merger agreement, the meeting of CSR shareholders must be held promptly after the date that this registration statement on Form F-4 is declared
effective by the SEC. CSR and Zoran have agreed to cooperate with each other in setting a mutually acceptable date so that both CSRs shareholder meeting and Zorans stockholder meeting are held on the same date. CSRs shareholder
meeting is currently scheduled to occur on August 30, 2011.
CSR has agreed to use its reasonable best efforts to obtain
formal approval of the U.K. Listing Authority of the shareholder circular relating to the general meeting of CSR shareholders to be held to consider the transactions contemplated by the merger agreement and the prospectus relating to the issuance of
CSR ordinary shares in the merger.
Reasonable Efforts
Each of CSR and Zoran has agreed to (i) use reasonable best efforts to solicit proxies from their respective shareholders in favor of
the merger and (ii) take all other action reasonably necessary or advisable to secure the approval of their respective shareholders in favor of the merger.
In addition, each of CSR and Zoran have agreed to use commercially reasonable efforts to take, or cause to be taken, all appropriate actions, and to do, or cause to be done, all things necessary, proper
or advisable to cause the conditions to the merger to be satisfied and to consummate the merger as promptly as practicable (and similarly to refrain from doing and cause not to be done any action, including any transaction, that would reasonably be
expected to cause these conditions to fail to be satisfied).
Employee Matters
CSR has agreed that, if any Zoran employee as of the effective time of the merger is transferred to CSR or becomes a participant in
CSRs employee benefit plans, then CSR will treat that employees prior service with Zoran as service rendered to CSR (to the extent prior service was recognized under the Zoran employee benefit plan providing similar benefits) for the
purposes of eligibility and vesting and to waive any pre-existing condition limitation that might otherwise apply to the extent waived or satisfied under a Zoran employee benefit plan.
In addition, CSR has agreed (except where terms and conditions of employment are specified by law, collective bargaining agreement, works
council rules or similar arrangements) to maintain after the effective time of the merger and until December 31, 2011 (i) base salary or annual wages (as applicable) to each Zoran employee who continues employment after the merger that are
not less favorable than the Zoran employee received immediately prior to the merger and (ii) employee benefits that are no less favorable, in the aggregate, than those employee benefits (other than any defined benefit retirement plans, change
in control or transaction-based compensation, retention or stay bonuses or equity-based compensation) that were provided to Zoran employees immediately prior to the merger.
The merger agreement provides that the provisions of the merger agreement relating to employee benefits are for the sole benefit of CSR and Zoran, and that no third party (including any Zoran employee)
will have any legal or equitable rights or remedies under the merger agreement, including in relation to continued employment with CSR or the surviving corporation in the merger or the maintenance of any employee benefit plans or arrangements by CSR
or the surviving corporation.
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Indemnification and Insurance
The merger agreement provides that, following the consummation of the merger, all rights to indemnification, advancement of expenses and
exculpation existing on the date of the merger agreement in favor of any present or former director or officer of Zoran or any of its subsidiaries will survive the merger. CSR has agreed not to amend, repeal or otherwise modify the provisions in
Zorans organizational documents, any organizational documents of any of its subsidiaries or any agreement providing for indemnification advancement of expenses and exculpation in any manner that would adversely affect the rights thereunder of
any such individual.
CSR has agreed to indemnify all present or former directors or officers of Zoran or any of its
subsidiaries to the fullest extent permitted by applicable laws with respect to all claims arising from the fact of being a director or officer of Zoran or any of its subsidiaries prior to the consummation of the merger or from acts and omissions
arising out of or relating to their services as directors or officers of Zoran or its subsidiaries prior to completion of the merger. CSR has agreed to pay as incurred any such indemnified persons legal fees, costs and expenses incurred in
connection with such legal action, subject to CSRs receipt of an undertaking from such person to repay such legal fees, costs and expenses if it is ultimately determined under applicable laws that such person is not entitled to be indemnified.
The merger agreement provides that CSR shall maintain, for at least seven years following the consummation of the merger,
policies of directors and officers liability insurance of at least the same coverage and amounts containing terms and conditions no less advantageous to the individuals covered by these policies than those in effect on the date of the
merger agreement, except that CSR will not be required to pay an annual premium for these policies in excess of $744,000. The merger agreement also provides that Zoran or CSR may obtain one or more seven-year prepaid tail insurance
policies in lieu of the policies of directors and officers liability insurance currently maintained by Zoran providing the same coverage and amounts and terms and conditions as Zorans current policies. If either Zoran or CSR
obtains such tail insurance, CSR will not be required to otherwise maintain replacement directors and officers liability insurance for the individuals covered by Zorans current directors and officers
liability insurance policies.
Hart-Scott-Rodino Act Filing
The merger agreement requires CSR and Zoran to file pre-merger notifications under the Hart-Scott-Rodino Act. CSR and Zoran have each
agreed to take any and all actions necessary to enable the applicable waiting period to expire, and to avoid or eliminate each and every impediment under any applicable law to cause the merger to occur as promptly as possible, including
(i) complying with or modifying any requests for additional information, (ii) offering, negotiating, committing to and effecting, by consent decree, hold separate order or otherwise, the sale, divestiture, license or other disposition of
any and all of the capital stock, assets rights products or business of CSR and Zoran and their respective subsidiaries or committing to any restrictions on their respective businesses and (iii) contesting, defending and appealing any
threatened or pending preliminary or permanent injunction or other order, decree or ruling or statute, rule, regulation or executive order that would adversely affect the ability of CSR or Zoran to consummate the transactions contemplated by the
merger agreement and taking any and all other actions to prevent the entry, enactment or promulgation thereof.
Neither CSR
nor Zoran would be required however to agree to (i) sell, hold separate, divest, discontinue or limit, before or after the completion of the merger, any assets, businesses or interest in any assets or businesses of CSR, Zoran or any of their
respective affiliates or (ii) any conditions relating to, or changes or restrictions in, the operation of any such assets or businesses which, in either case, would reasonably be expected to result in a material adverse effect on the business
of CSR and Zoran, taken together, as expected to be conducted after the completion of the merger.
The waiting period under
the Hart-Scott Rodino Act with respect to the merger was terminated early on March 24, 2011.
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Establishment of ADR Facility; Stock Exchange Listings
The merger agreement provides that CSR will cause a sponsored American depositary receipt facility to be established with JPMorgan Chase
Bank, N.A., as the depositary, for the purpose of issuing the CSR ADSs to be issued to Zoran stockholders pursuant to the merger, and that CSR will enter into a customary deposit agreement with the depositary, which agreement will provide, among
other things, that each CSR ADS will represent and be exchangeable for four CSR ordinary shares.
The merger agreement also
provides that CSR will use its commercially reasonable efforts to cause the CSR ADSs to be issued in the merger to be approved for listing on The NASDAQ Stock Market as promptly as practicable after establishment of the ADR facility, subject to
official notice of issuance. CSR has also agreed to use its commercially reasonable efforts to cause the CSR ordinary shares underlying the CSR ADSs to be approved for admission to the Official List of the U.K. Listing Authority and trading on the
London Stock Exchanges main market for listed securities prior to the effective time of the merger.
Other Agreements
The merger agreement also contains covenants relating to the preparation of this proxy statement/prospectus and the holding of the special meeting of Zoran stockholders, access to information of the other
company, public announcements with respect to the transactions contemplated by the merger agreement, the maintenance and prosecution of each partys intellectual property rights, tax matters (including requesting certain tax rulings from the
Israeli Tax Authority), and obtaining third party consents under Zorans business contracts.
Conditions
to the Closing of the Merger
Each partys obligation to effect the merger is subject to satisfaction or mutual
waiver of the following conditions:
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the merger agreement is adopted by Zoran stockholders;
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the transactions contemplated by the merger agreement are approved by CSR shareholders;
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the CSR ADSs issuable to Zoran stockholders under the merger agreement are approved for listing on The NASDAQ Stock Market, subject to official notice
of issuance;
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the CSR ordinary shares underlying the CSR ADSs are admitted to the Official List of the U.K. Listing Authority and to trading on the London Stock
Exchanges main market for listed securities, subject only to allotment to the former Zoran stockholders;
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the waiting period under the U.S. Hart-Scott-Rodino Act has expired or been terminated;
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there are no governmental laws, orders, judgments, injunctions or other restraints, and no governmental authority has instituted any proceeding seeking
such laws, order, judgments, injunctions or other restraints, that prohibit consummation of the merger or that relate to the merger and would be reasonably expected to have a material adverse effect on CSR or Zoran after giving effect to the merger;
and
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each of (i) the registration statement on Form F-4 relating to the registration under the U.S. Securities Act of 1933, as amended, of the
issuance of CSR ordinary shares in the form of CSR ADRs in the merger, (ii) the registration statement on Form F-6 relating to the registration under the U.S. Securities Act of 1933, as amended, of the issuances of the CSR ADSs, and
(iii) the registration statement on Form 8-A relating to the registration under the U.S. Securities Exchange Act of 1934, as amended, of the CSR ADSs and the underlying CSR ordinary shares is effective, and the SEC has not issued any stop
order suspending the effectiveness of any such registration statement or initiated or threatened any stop order proceedings that are not concluded or withdrawn.
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The waiting period under the Hart-Scott Rodino Act with respect to the merger was terminated
early on March 24, 2011.
CSRs obligation to consummate the merger is further subject to the satisfaction or waiver
of the following additional conditions:
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the representations and warranties of Zoran must be true and correct on the date on which the merger is to be completed as if made as of that date or,
if the representations and warranties expressly relate to an earlier date, then as of that earlier date, except where the failure of these representations and warranties to be true and correct, without giving effect to any limitation as to
materiality or material adverse effect, has not had and would not reasonably be expected to have, individually or in the aggregate, a material adverse effect on Zoran; provided that the representation and warranty regarding
its compliance with its obligations under the original agreement must be true in all material respects;
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Zoran must have performed in all material respects all of its obligations under the merger agreement;
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the absence of any effect, change, occurrence, circumstance or development since December 31, 2010 that has had or would reasonably be expected to
have, individually or in the aggregate, a material adverse effect on Zoran;
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Zoran must deliver to CSR a certificate signed by an executive officer of Zoran stating that the above three conditions have been met; and
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the receipt by Zoran of required approvals from the Israeli Office of Chief Scientist and Israeli Investment Center and such approvals not having been
revoked or rescinded.
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Zorans obligation to consummate the merger is further subject to the
satisfaction or waiver of the following additional conditions:
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the representations and warranties of CSR must be true and correct on the date on which the merger is to be completed as if made as of that date or, if
the representations and warranties expressly relate to an earlier date, then as of that earlier date, except where the failure of these representations and warranties to be true and correct, without giving effect to any limitation as to
materiality or material adverse effect, has not had and would not reasonably be expected to have, individually or in the aggregate, a material adverse effect on CSR; provided that the representation and warranty regarding its
compliance with its obligations under the original agreement must be true in all material respects;
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CSR must have performed in all material respects all of its obligations under the merger agreement;
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the absence of any effect, change, occurrence, circumstance or development since December 31, 2010 that has had or would reasonably be expected to
have, individually or in the aggregate, a material adverse effect on CSR;
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CSR must deliver to Zoran a certificate signed by an executive officer of CSR stating that the above three conditions have been met;
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the establishment of a sponsored American depositary receipt facility with JPMorgan Chase Bank, N.A., on the terms provided for in the merger
agreement; and
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the appointment of Dr. Levy Gerzberg as a non-executive director to the CSR board of directors.
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The merger agreement provides that a material adverse effect means any effect, event, change, occurrence, circumstance or
development which individually or in the aggregate (i) is materially adverse to the business, assets, properties, liabilities or condition (financial or otherwise) or results of operations of Zoran or CSR and their respective subsidiaries,
taken as a whole or (ii) would prevent Zoran or CSR from consummating the merger and the other transactions contemplated by the merger agreement. When determining whether an effect, event, change, occurrence, circumstance or development,
individually or in the aggregate, is materially
-121-
adverse to the business, assets, properties, liabilities or condition (financial or otherwise) or results of operations of Zoran or CSR and their respective subsidiaries, taken as a whole, none
of the following, either alone or in combination, may be taken into account in determining whether a material adverse effect has occurred:
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effects of the financial, securities or capital markets or the economy to the extent that they do not disproportionately affect Zoran or CSR and their
respective subsidiaries, taken as a whole, compared to other companies operating in the principal industries in which Zoran or CSR and their respective subsidiaries operate;
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effects arising from the industries in which Zoran or CSR and their respective subsidiaries operate in general to the extent that they do not
disproportionately affect Zoran or CSR and their respective subsidiaries, taken as a whole, compared to other companies operating in the principal industries in which Zoran or CSR and their respective subsidiaries operate;
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effects arising from the currency markets or currency fluctuations generally;
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effects arising from the negotiation, execution, announcement or performance of the merger agreement or the consummation of the transactions
contemplated by the merger agreement;
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effects resulting from CSRs or Zorans refusal or unreasonable delay in granting a request from the other party to take or omit to take any
action under the merger agreement, if taking such action or omitting to take such action would have avoided such effect;
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changes in law, rule or regulations or generally accepted accounting principles, IFRS or the interpretation thereof to the extent that they do not
disproportionately affect Zoran or CSR and their respective subsidiaries, taken as a whole, compared to other companies operating in the principal industries in which Zoran or CSR and their respective subsidiaries operate and any effects arising
prior to June 16, 2011 from the March 11, 2011 earthquake in Japan and the resulting tsunami and nuclear accident;
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with respect to Zoran, any effect arising prior to June 16, 2011 from the April 12, 2011 announcement by Cisco Systems, Inc. to close down its
Flip video camcorder business;
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any action taken by Zoran or CSR at the request of, or with the consent of, the other party;
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acts of war, sabotage or terrorism, or any escalation or worsening of any such acts, earthquakes, hurricanes, tornadoes or other natural disasters to
the extent they do not disproportionately affect Zoran or CSR and their respective subsidiaries, taken as a whole, compared to other companies operating in the principal industries or locations in which Zoran or CSR and their respective subsidiaries
operate;
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any change in the trading prices of Zoran common stock or CSR ordinary shares by itself;
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any failure by Zoran or CSR to meet any internal or public projections, forecasts or estimates of revenue or earnings or other financial or operational
measures or the issuance of revised projections that are not as optimistic as those in existence as of the date hereof;
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any stockholder class action or derivative litigation or other litigation to the extent arising from allegations of a breach of fiduciary duty or other
legal duty relating to the negotiation, execution, delivery or performance of the merger agreement or the consummation of the transactions contemplated by the merger agreement;
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with respect to Zoran, effects caused by the actions taken by Ramius Value & Opportunity Master Fund, LTD and its affiliates to replace
members of Zorans board of directors; and
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with respect to Zoran, effects arising out of certain litigation to which Zoran is a party.
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The merger agreement provides that neither party may rely on the failure of a condition to the merger if the failure was caused by that
partys failure to fulfill any of its obligations under the merger agreement.
-122-
Any or all of the conditions described above may be waived, in whole or in part, by CSR or
Zoran, to the extent legally allowed. Neither CSR nor Zoran currently expects to waive any material condition to the completion of the merger.
It currently is anticipated that the effective time of the merger will occur during the third quarter of 2011, but neither CSR nor Zoran can guarantee when or if the merger will be completed.
Termination Events
The merger agreement may be terminated at any time prior to the consummation of the merger by mutual written consent of CSR and Zoran, and either party may terminate the merger agreement in the following
circumstances:
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if the merger has not been consummated by December 31, 2011 unless any of the registration statements on Form F-4 (of which this proxy
statement/prospectus is a part), Form F-6 or Form 8-A is not effective or there is a stop order suspending the effectiveness of any such registration statements (or proceedings for that purpose have been initiated or threatened by the SEC and not
concluded or withdrawn), in which case this termination right shall be suspended until February 29, 2012, except that a party may not terminate the merger agreement on this basis if its failure to fulfill any of its obligations was a principal cause
of the failure to consummate the merger by such date;
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if the merger agreement is not adopted by Zoran stockholders after a vote thereon at a duly held meeting of Zoran stockholders; or
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if the transactions contemplated by the merger agreement are not approved by CSR shareholders after a vote thereon at a duly held meeting of CSR
shareholders.
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CSR may terminate the merger agreement prior to the completion of the merger:
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if (i) Zorans board of directors withdraws, modifies, qualifies or amends its recommendation in favor of the merger in a manner adverse to
CSR, (ii) Zorans board of directors approves, endorses or recommends a takeover proposal for Zoran other than the merger, (iii) a tender offer or exchange offer that constitutes a takeover proposal for Zoran is commenced and
Zorans board of directors fails to recommend against acceptance of such tender offer or exchange offer by Zoran stockholders (including, for these purposes, by taking no position with respect to the acceptance of such tender offer or exchange
offer by its stockholders, which shall constitute a failure to recommend against acceptance of such tender offer or exchange offer) within ten business days after commencement the tender offer or exchange offer, or (iv) Zoran or its board of
directors publicly announce an intention to do any of the foregoing;
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if Zoran breaches any of its covenants described in The Merger AgreementZorans Agreement Not to Solicit Other Offers in any
material respect;
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if a material adverse effect on Zoran occurs after the date of the original merger agreement;
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if Zoran breaches any of its representations, warranties, covenants or agreements contained in the merger agreement, which breach (i) would result
in a material adverse effect on Zoran (in the case of representations and warranties) or Zorans failure to perform in all material respects all of its obligations under the merger agreement (in the case of covenants and agreements) and
(ii) has not been cured by Zoran within 20 business days after its receipt of written notice of such breach from CSR; or
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before CSR shareholders vote to approve the merger, if CSR has complied in all material respects with its obligations described in The Merger
AgreementCSRs Agreement Not to Solicit Other Offers, in order to enter into a contract providing for a superior proposal for CSR that is conditioned upon CSR terminating the merger agreement.
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-123-
Zoran may terminate the merger agreement prior to the consummation of the merger:
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if (i) CSRs board of directors withdraws, modifies, qualifies or amends its recommendation in favor of the merger in a manner adverse to
Zoran, (ii) CSRs board of directors approves, endorses or recommends a takeover proposal for CSR other than the merger, (iii) a tender offer or exchange offer that constitutes a takeover proposal for CSR is commenced and CSRs
board of directors fails to recommend against acceptance of such tender offer or exchange offer by CSR shareholders (including, for these purposes, by taking no position with respect to the acceptance of such tender offer or exchange offer by its
stockholders, which shall constitute a failure to recommend against acceptance of such tender offer or exchange offer) within ten business days after commencement the tender offer or exchange offer, or (iv) CSR or its board of directors
publicly announce an intention to do any of the foregoing;
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if CSR breaches any of its covenants described in The Merger AgreementCSRs Agreement Not to Solicit Other Offers in any
material respect;
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if a material adverse effect on CSR occurs after the date of the merger agreement;
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if CSR breaches any of its representations, warranties, covenants or agreements contained in the merger agreement, which breach (i) would result
in a material adverse effect on CSR (in the case of representations and warranties) or CSRs failure to perform in all material respects all of its obligations under the merger agreement (in the case of covenants and agreements) and
(ii) has not been cured by CSR within 20 business days after its receipt of written notice of such breach from Zoran; or
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before Zoran stockholders vote to approve the merger, if Zoran has complied in all material respects with its obligations described in The Merger
AgreementZorans Agreement Not to Solicit Other Offers in order to enter into a contract providing for a superior proposal for Zoran.
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Termination Fees
Zoran will be required
to pay a termination fee of $8,600,000 (subject to a possible adjustment for value added tax) to CSR in the following circumstances:
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a takeover proposal for Zoran has been publicly announced and is not withdrawn, (ii) either CSR or Zoran terminates the merger agreement because
of a failure to secure the approval of the Zoran stockholders, and (iii) within six months following the date of termination, Zoran enters into a contract providing for the implementation of, or consummates, a takeover proposal for Zoran
(whether or not that takeover proposal is the one that was announced and not withdrawn when the merger agreement was terminated);
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CSR terminates the merger agreement because Zorans board of directors has withdrawn, modified, qualified or amended its recommendation of the
merger in a manner adverse to CSR or approved, endorsed or recommended a takeover proposal (other than the merger), Zorans board of directors fails to recommend against acceptance of a tender offer or exchange offer constituting such a
takeover proposal, or Zoran or its board of directors publicly announce an intention to do any of the foregoing, unless at the time of CSRs termination, Zoran has the right to terminate the merger agreement as a result of CSRs uncured
breach of any of its representations, warranties, agreements or other agreements in the merger agreement (as described in The Merger AgreementTermination Events); or
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CSR terminates the merger agreement because Zoran has breached, in a material respect, one of its covenants described in The Merger
AgreementZorans Agreement Not to Solicit Other Offers.
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Zoran will be required to pay
termination fee of $12,700,000 (subject to a possible adjustment for value added tax) to CSR if Zoran terminates the merger agreement in order to enter into a contract providing for a superior proposal for Zoran.
-124-
CSR will be required to pay a termination fee of $8,600,000 (subject to a possible
adjustment for value added tax) to Zoran in the following circumstances:
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a takeover proposal for CSR has been publicly announced and is not withdrawn, (ii) either Zoran or CSR terminates the merger agreement because of
a failure to secure the approval of the CSR shareholders, and (iii) within six months following the date of termination, CSR enters into a contract providing for the implementation of, or consummates, a takeover proposal for CSR (whether or not
that takeover proposal is the one that was announced and not withdrawn when the merger agreement was terminated);
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Zoran terminates the merger agreement because CSRs board of directors has withdrawn, modified, qualified or amended its recommendation of the
merger in a manner adverse to Zoran or approved, endorsed or recommended a takeover proposal (other than the merger), CSRs board of directors fails to recommend against acceptance of a tender offer or exchange offer constituting such a
takeover proposal, or CSR or its board of directors publicly announce an intention to do any of the foregoing, unless at the time of Zorans termination, CSR has the right to terminate the merger agreement as a result of Zorans uncured
breach of any of its representations, warranties, agreements or other agreements in the merger agreement (as described in The Merger AgreementTermination Events);
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Zoran terminates the merger agreement because CSR has breached, in a material respect, one of its covenants described in The Merger
AgreementCSRs Agreement Not to Solicit Other Offers; or
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CSR terminates the merger agreement in order to enter into a contract providing for a superior proposal for CSR that is conditioned upon
CSR terminating the merger agreement.
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Expenses
Whether or not the merger is consummated, all costs and expenses incurred in connection with the merger, the merger agreement and the
transactions contemplated by the merger agreement will be paid by the party incurring those costs and expenses, except that expenses incurred in connection with the printing, filing and mailing of this proxy statement/prospectus and the filing fee
under Hart-Scott-Rodino Act will be shared equally by CSR and Zoran.
Amendment; Waiver
The merger agreement may be amended by CSR, Zeiss Merger Sub, Inc. and Zoran at any time prior to the closing of the merger if approved by
their respective boards of directors. Any amendment that requires the approval of CSR shareholders or Zoran stockholders under applicable laws may not be made without such approval.
Governing Law
The merger agreement is
governed by and will be construed in accordance with the laws of the State of Delaware.
-125-
THE VOTING AGREEMENTS
The following discussion summarizes material provisions of the voting agreements. Complete copies of the form of the Zoran voting
agreement and CSR voting agreement are set forth in Appendix C and Appendix D to this proxy statement/prospectus and are incorporated by reference into this proxy statement/prospectus. The rights and obligations of the parties to the voting
agreement are governed by the express terms and conditions of the voting agreements and not by this summary. Zoran stockholders are urged to read the forms of voting agreements carefully and in their entirety.
Zoran Voting Agreements
On June 16, 2011, certain directors and executive officers of Zoran entered into voting agreements with CSR.
As of June 16, 2011, the Zoran directors and officers that entered into voting agreements beneficially owned shares representing less than 1% of all outstanding shares of Zoran common stock.
The Zoran voting agreements provide that the signatories (other than CSR):
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will not sell or otherwise dispose of the shares of Zoran common stock held by such person during the pendency of the merger;
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will not take certain other actions that would restrict or impede the merger; and
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will vote (or cause the registered holder of the shares to vote) in favor of the adoption of the merger agreement.
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The voting agreements will terminate upon the earliest to occur of (i) the consummation of the merger, (ii) the termination of
the merger agreement, (iii) the date the merger agreement is amended in a manner that reduces the consideration to be received by Zoran stockholders in the merger and (iv) the date on which either Zorans or CSRs board of
directors withdraws, modifies, qualifies or amends its recommendation of the merger, or the date on which Zoran or CSR recommends a takeover proposal in respect of itself, in each case in accordance with the terms of the merger
agreement.
Each voting agreement provides that the obligations of the signatories under each agreement (other than CSR) are
solely in his capacity as a stockholder of Zoran, and none of the provisions of each agreement will be deemed to restrict or limit any fiduciary or other duty any of them may have as a member of Zorans board of directors, as an executive
officer of Zoran, or as a trustee, director or officer of any other entity that is not a signatory to the applicable agreement.
The Zoran voting agreements are governed by Delaware law.
CSR Voting Agreements
On June 16, 2011,
certain directors and executive officers of CSR entered into voting agreements with Zoran.
As of June 16, 2011, the CSR
directors and officers that entered into voting agreements beneficially owned shares representing approximately 1.2% of all outstanding shares of CSR common stock.
The CSR voting agreements provide that the signatories (other than Zoran):
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will not sell or otherwise dispose of the shares of CSR common stock held by such person during the pendency of the merger;
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-126-
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will not take certain other actions which would restrict or impede the merger; and
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will vote (or procure that the registered holder of the shares will vote) in favor of the proposals to adopt the merger agreement and approve the
merger.
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The voting agreements will terminate upon the earliest to occur of (i) the consummation of the
merger, (ii) the termination of the merger agreement and (iii) the date on which either CSRs or Zorans board of directors withdraws, modifies, qualifies or amends its recommendation of the merger, or the date on which CSR or
Zoran recommends a takeover proposal in respect of itself, in each case in accordance with the terms of the merger agreement.
Each voting agreement provides that the obligations of the signatories under each agreement (other than Zoran) are solely in his capacity as a stockholder of CSR, and none of the provisions of each
agreement will be deemed to restrict or limit any fiduciary or other duty any of them may have as a member of CSRs board of directors, as an executive officer of CSR, or as a trustee, director or officer of any other entity that is not a
signatory to the applicable agreement.
The CSR voting agreements are governed by the laws of England and Wales.
-127-
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL
INFORMATION
Presented below are the unaudited pro forma condensed consolidated balance sheet of CSR as of
December 31, 2010 and the unaudited pro forma condensed consolidated income statement of CSR for the 52 weeks ended December 31, 2010. The unaudited pro forma condensed consolidated financial information has been prepared to give
effect to the acquisition of Zoran by CSR and the acquisition of Microtune by Zoran. The unaudited pro forma condensed consolidated balance sheet as of December 31, 2010 has been prepared as though the acquisition of Zoran occurred as of that
date. The unaudited pro forma condensed consolidated income statement for the 52 weeks ended December 31, 2010 has been prepared as though the acquisition of Zoran and Zorans acquisition of Microtune occurred as of the beginning of such
period, namely January 2, 2010. The assumptions underlying the pro forma adjustments are described in the accompanying notes.
The unaudited pro forma condensed consolidated financial information has been prepared based upon the following:
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the audited consolidated financial statements of CSR as of and for the 52 weeks ended December 31, 2010, which have been prepared in accordance
with IFRS as issued by the IASB and are incorporated by reference in this proxy statement/prospectus;
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the audited consolidated financial statements of Zoran as of and for the year ended December 31, 2010, which have been prepared in accordance with
U.S. GAAP and are incorporated by reference in this proxy statement/prospectus. These consolidated financial statements have been adjusted to IFRS for purposes of presentation in the unaudited pro forma condensed consolidated financial
information; and
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the unaudited consolidated statement of operations of Microtune for the nine months ended September 30, 2010, which is incorporated by reference
in this proxy statement/prospectus. This unaudited condensed financial information and the two months results of Microtune to November 30, 2010 have been adjusted to IFRS for purposes of presentation in the unaudited pro forma condensed consolidated
income statement.
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CSRs financial statements are reported on a 52 or 53 week basis. The fiscal year
2010 for CSR was for the period from January 2, 2010 to December 31, 2010. Zoran and Microtunes fiscal year-ends are on a calendar year basis; the fiscal year 2010 for Zoran and Microtune was for the period from January 1, 2010
to December 31, 2010.
The estimated purchase price for the acquisition of Zoran is $452 million, and based on the
closing price of CSR ordinary shares of £2.904 as of July 20, 2011, and converted to a price in U.S. dollars of $4.69 per share of Zoran common stock using a U.S. dollar/GBP exchange rate of 1.6139 as of the same date, as reported by Financial
Times, being the latest practicable business day before publication of this proxy statement/prospectus.
In addition, it is
estimated that the fair value of vested stock options is $17.6 million, resulting in an aggregate purchase price of $469.6 million. The actual purchase price will be determined at the closing date based on the CSR ordinary share price and the U.S.
dollar/GBP exchange rate at that date and accordingly will likely vary from that used in the preparation of the pro forma financial information. If the merger is completed, Zoran stockholders will receive a combination of $6.26 in cash in United
States dollars, without interest, plus 0.14725 of a CSR ADS (which is equivalent to 0.589 CSR ordinary shares) for each share of Zoran common stock they own (other than shares held by Zoran, CSR or any of the their respective wholly owned
subsidiaries, or shares for which appraisal rights are properly exercised) as of immediately prior to the effective time of the merger. Each CSR ADS represents four CSR ordinary shares, par value £0.001. A 10% increase in the CSR ordinary
share price from the price of $4.69 per share of Zoran common stock used in the pro forma, which could be caused by changes in the GBP price of CSR ordinary shares and/or changes in the U.S. dollar/GBP exchange rate, would result in an increase in
the goodwill recognized of $14 million. A 10% decrease in the CSR ordinary share price used in the pro forma would result in a decrease in the goodwill recognized of $14 million.
-128-
The estimated purchase price takes into account the Zoran options in existence as of July
20, 2011, the latest practicable business day before publication of this proxy statement/prospectus.
Zoran acquired Microtune
on November 30, 2010. The total purchase price for Microtune was approximately $161.2 million, approximately $159.2 million of which was in cash and approximately $2.0 million of which represented the portion of the fair value of Microtune RSUs
assumed by Zoran that was attributable to the purchase price. The effect of this acquisition is already included in the historical Zoran audited consolidated balance sheet as of December 31, 2010.
The acquisition of Zoran will be accounted for by CSR using the acquisition method pursuant to IFRS 3 (2008),
Business
Combinations
. Under the acquisition method, assets and liabilities are recorded at their fair values on the date of purchase and the total purchase price is allocated to the tangible and intangible assets acquired and liabilities assumed. As of
the date of this proxy statement/prospectus, the valuation studies necessary to finalize the fair values of the assets acquired and liabilities assumed and the related allocation of the purchase price have not been completed. Accordingly, CSR has
allocated the total estimated purchase price, calculated as described under Notes to Unaudited Pro Forma Condensed Consolidated Financial Information, to the assets acquired and liabilities assumed, based on preliminary estimates of
their fair values. A final determination of these fair values will reflect, among other things, CSRs consideration of a final valuation of the actual net tangible and intangible assets, such as acquired in-process research and development,
customer relationships, developed and core technology, intellectual property, patents and trade names that exist as at the closing of the acquisition as well as any corresponding income tax effects. Any final adjustments during the one year
measurement period from the acquisition date will change the allocation of the purchase price which will affect the fair value assigned to the assets and liabilities and could result in a material change to the unaudited pro forma condensed
consolidated financial information.
The unaudited pro forma adjustments give effect to events that are directly attributable
to the acquisition, are factually supportable and expected to have a continuing impact on the Combined Company. The unaudited pro forma condensed consolidated financial information is presented for illustrative purposes only and reflects estimates
and assumptions made by CSRs management that it considers reasonable. It does not purport to represent what CSRs actual results of operations or financial condition would have been had the acquisitions occurred on the dates indicated,
nor is it necessarily indicative of CSRs future results of operations or financial condition. In addition to the matters noted above, the unaudited pro forma condensed consolidated financial information does not reflect the effect of any
synergies and efficiencies that may result from combining CSR, Zoran and Microtune.
Nonrecurring charges and credits directly
related to the Zoran acquisition and Zorans acquisition of Microtune, which will be included in CSRs income statement within 12 months following the acquisition, have not been included in the unaudited pro forma condensed consolidated
income statement. For a discussion of such items, see Notes to Unaudited Pro Forma Condensed Consolidated Financial Information.
The unaudited pro forma condensed consolidated financial information should be read in conjunction with the information contained in Selected Historical Consolidated Financial Information of
CSR, Selected Historical Consolidated Financial Information of Zoran, the Business and Financial Review section of CSRs Annual Report for the year ended December 31, 2010, the Managements
Discussion and Analysis of Financial Condition and Results of Operations section of Zorans Annual Report on Form 10-K for the year ended December 31, 2010, and the audited consolidated financial statements of CSR, Zoran and
Microtune, appearing elsewhere in this proxy statement/prospectus or incorporated by reference herein.
-129-
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
As of December 31, 2010
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Historical
CSR
(Note
1)
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|
Historical
Zoran
(Note
2)
|
|
|
Acquisition
adjustments
(Note
3)
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|
|
Pro forma CSR
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|
(in U.S.$ thousands, except share amounts)
|
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Non-current assets
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|
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|
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|
Goodwill
|
|
|
224,651
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|
|
|
44,784
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|
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|
(30,874
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)
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|
|
(a
|
)
|
|
|
238,561
|
|
Other intangible assets
|
|
|
36,070
|
|
|
|
39,490
|
|
|
|
63,045
|
|
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|
(b
|
)
|
|
|
138,605
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|
Property, plant and equipment
|
|
|
28,354
|
|
|
|
15,124
|
|
|
|
|
|
|
|
|
|
|
|
43,478
|
|
Investments
|
|
|
1,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,000
|
|
Other long term assets
|
|
|
|
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|
34,535
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|
|
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|
34,535
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|
Deferred tax asset
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|
|
28,116
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|
|
|
67,778
|
|
|
|
(11,707
|
)
|
|
|
(c
|
)
|
|
|
84,187
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-current assets
|
|
|
318,191
|
|
|
|
201,711
|
|
|
|
20,464
|
|
|
|
|
|
|
|
540,366
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Inventories
|
|
|
85,306
|
|
|
|
48,139
|
|
|
|
12,515
|
|
|
|
(d
|
)
|
|
|
145,960
|
|
Derivative financial instruments
|
|
|
1,870
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,870
|
|
Trade and other receivables
|
|
|
105,887
|
|
|
|
35,167
|
|
|
|
|
|
|
|
|
|
|
|
141,054
|
|
Corporation tax debtor
|
|
|
6,728
|
|
|
|
5,110
|
|
|
|
|
|
|
|
|
|
|
|
11,838
|
|
Treasury deposits and investments
|
|
|
267,833
|
|
|
|
180,159
|
|
|
|
(313,721
|
)
|
|
|
(a
|
)
|
|
|
134,271
|
|
Cash and cash equivalents
|
|
|
172,315
|
|
|
|
81,107
|
|
|
|
(17,976
|
)
|
|
|
(a
|
)
|
|
|
235,446
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
639,939
|
|
|
|
349,682
|
|
|
|
(319,182
|
)
|
|
|
|
|
|
|
670,439
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
958,130
|
|
|
|
551,393
|
|
|
|
(298,718
|
)
|
|
|
|
|
|
|
1,210,805
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade and other payables
|
|
|
125,223
|
|
|
|
63,125
|
|
|
|
(1,641
|
)
|
|
|
(e
|
)
|
|
|
186,707
|
|
Current tax liabilities
|
|
|
2,852
|
|
|
|
21,300
|
|
|
|
|
|
|
|
|
|
|
|
24,152
|
|
Obligations under finance leases
|
|
|
51
|
|
|
|
72
|
|
|
|
|
|
|
|
|
|
|
|
123
|
|
Derivative financial instruments
|
|
|
899
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
899
|
|
Provisions
|
|
|
5,602
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,602
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
134,627
|
|
|
|
84,497
|
|
|
|
(1,641
|
)
|
|
|
|
|
|
|
217,483
|
|
|
|
|
|
|
|
Net current assets
|
|
|
505,312
|
|
|
|
265,185
|
|
|
|
(317,541
|
)
|
|
|
|
|
|
|
452,956
|
|
|
|
|
|
|
|
Non-current liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade and other payables
|
|
|
45,694
|
|
|
|
33,948
|
|
|
|
(2,054
|
)
|
|
|
(f
|
)
|
|
|
77,588
|
|
Contingent consideration
|
|
|
1,567
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,567
|
|
Long-term provisions
|
|
|
1,483
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,483
|
|
Obligations under finance leases
|
|
|
195
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
195
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-current liabilities
|
|
|
48,939
|
|
|
|
33,948
|
|
|
|
(2,054
|
)
|
|
|
|
|
|
|
80,833
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
183,566
|
|
|
|
118,445
|
|
|
|
(3,695
|
)
|
|
|
|
|
|
|
298,316
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets
|
|
|
774,564
|
|
|
|
432,948
|
|
|
|
(295,023
|
)
|
|
|
|
|
|
|
912,489
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share capital
|
|
|
322
|
|
|
|
49
|
|
|
|
(1
|
)
|
|
|
(g
|
)
|
|
|
370
|
|
Share premium account
|
|
|
455,390
|
|
|
|
856,644
|
|
|
|
(703,256
|
)
|
|
|
(g
|
)
|
|
|
608,778
|
|
Retained earnings (deficit)
|
|
|
318,852
|
|
|
|
(423,745
|
)
|
|
|
408,234
|
|
|
|
(g
|
)
|
|
|
303,341
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equity
|
|
|
774,564
|
|
|
|
432,948
|
|
|
|
(295,023
|
)
|
|
|
|
|
|
|
912,489
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of shares in issue at balance sheet date
(i)
|
|
|
177,808,312
|
|
|
|
|
|
|
|
29,517,854
|
|
|
|
|
|
|
|
207,326,166
|
|
(i)
|
The historical CSR shares in issue as of December 31, 2010 represents 184,953,312 issued shares, net of 7,145,000 shares held by the CSR Employee Benefit Trust.
The number of shares in issue at the balance sheet date has been adjusted by 29,517,854 shares representing the estimated number of shares underlying the CSR ADSs to be issued as consideration, based upon 50,115,202 Zoran shares of common stock
outstanding as of July 20, 2011. The number of shares exchanged will be 0.14725 CSR ADSs for each share of Zoran, which is equivalent to 0.589 CSR ordinary shares. Each CSR ADS represents four CSR ordinary shares.
|
-130-
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED INCOME STATEMENT
For the 52 weeks ended December 31, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Historical
CSR
(Note
1)
|
|
|
Historical
Zoran
(Note
2)
|
|
|
Acquisition
adjustments
(Note 3)
|
|
|
|
|
|
Pro forma
CSR
|
|
|
|
(in U.S.$ thousands, except share and per share amounts)
|
|
Revenue
|
|
|
800,608
|
|
|
|
441,188
|
|
|
|
|
|
|
|
|
|
|
|
1,241,796
|
|
Cost of sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of acquired intangible assets
|
|
|
(5,663
|
)
|
|
|
(8,350
|
)
|
|
|
1,494
|
|
|
|
(h
|
)
|
|
|
(12,519
|
)
|
Other cost of sales
|
|
|
(418,367
|
)
|
|
|
(212,785
|
)
|
|
|
|
|
|
|
|
|
|
|
(631,152
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cost of sales
|
|
|
(424,030
|
)
|
|
|
(221,135
|
)
|
|
|
1,494
|
|
|
|
|
|
|
|
(643,671
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
376,578
|
|
|
|
220,053
|
|
|
|
1,494
|
|
|
|
|
|
|
|
598,125
|
|
Research and development expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other research and development expenses
|
|
|
(189,187
|
)
|
|
|
(136,341
|
)
|
|
|
|
|
|
|
|
|
|
|
(325,528
|
)
|
Share-based payment charges
|
|
|
(5,760
|
)
|
|
|
(6,886
|
)
|
|
|
1,004
|
|
|
|
(i
|
)
|
|
|
(11,642
|
)
|
Amortization of acquired intangible assets
|
|
|
(4,980
|
)
|
|
|
|
|
|
|
(1,513
|
)
|
|
|
(h
|
)
|
|
|
(6,493
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total research and development expenses
|
|
|
(199,927
|
)
|
|
|
(143,227
|
)
|
|
|
(509
|
)
|
|
|
|
|
|
|
(343,663
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales, general and administrative expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other sales, general and administrative expenses
|
|
|
(114,078
|
)
|
|
|
(114,881
|
)
|
|
|
|
|
|
|
|
|
|
|
(228,959
|
)
|
Share-based payment charges
|
|
|
(4,062
|
)
|
|
|
(8,685
|
)
|
|
|
(445
|
)
|
|
|
(i
|
)
|
|
|
(13,192
|
)
|
Amortization of acquired intangible assets
|
|
|
(3,494
|
)
|
|
|
(698
|
)
|
|
|
(4,605
|
)
|
|
|
(h
|
)
|
|
|
(8,797
|
)
|
Integration and restructuring expenses
|
|
|
(1,085
|
)
|
|
|
(1,390
|
)
|
|
|
|
|
|
|
|
|
|
|
(2,475
|
)
|
Acquisition-related fees
|
|
|
(397
|
)
|
|
|
(8,991
|
)
|
|
|
8,991
|
|
|
|
(j
|
)
|
|
|
(397
|
)
|
Litigation settlement
|
|
|
(59,788
|
)
|
|
|
(1,115
|
)
|
|
|
|
|
|
|
|
|
|
|
(60,903
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total sales, general and administrative expenses
|
|
|
(182,904
|
)
|
|
|
(135,760
|
)
|
|
|
3,941
|
|
|
|
|
|
|
|
(314,723
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
|
(6,253
|
)
|
|
|
(58,934
|
)
|
|
|
4,926
|
|
|
|
|
|
|
|
(60,261
|
)
|
Investment revenue
|
|
|
812
|
|
|
|
7,606
|
|
|
|
|
|
|
|
|
|
|
|
8,418
|
|
Other gains (losses)
|
|
|
640
|
|
|
|
(110
|
)
|
|
|
|
|
|
|
|
|
|
|
530
|
|
Exchange (losses) gains
|
|
|
(186
|
)
|
|
|
658
|
|
|
|
|
|
|
|
|
|
|
|
472
|
|
Finance costs
|
|
|
(718
|
)
|
|
|
(69
|
)
|
|
|
|
|
|
|
|
|
|
|
(787
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before tax
|
|
|
(5,705
|
)
|
|
|
(50,849
|
)
|
|
|
4,926
|
|
|
|
|
|
|
|
(51,628
|
)
|
Tax
|
|
|
22,331
|
|
|
|
(14,927
|
)
|
|
|
7,356
|
|
|
|
(k
|
)
|
|
|
14,760
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit/(loss) for the period
|
|
|
16,626
|
|
|
|
(65,776
|
)
|
|
|
12,282
|
|
|
|
|
|
|
|
(36,868
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings/(loss) per share
(i)
|
|
|
0.09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.18
|
)
|
Weighted average number of shares in issue (millions)
(ii)
|
|
|
178.1
|
|
|
|
|
|
|
|
29.5
|
|
|
|
|
|
|
|
207.6
|
|
Diluted earnings/(loss) per share
|
|
|
0.09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.18
|
)
|
Weighted average number of shares on fully diluted basis (millions)
(ii)
|
|
|
181.0
|
|
|
|
|
|
|
|
29.5
|
|
|
|
|
|
|
|
207.6
|
|
(i)
|
Basic earnings/(loss) per share calculated by taking pro forma CSR loss of $36,868 thousands divided by the pro forma weighted average number of shares in issue.
|
(ii)
|
The weighted average number of shares outstanding during the period has been adjusted to give effect to shares to be issued as consideration for the transaction as if
the acquisition had taken place as of January 2, 2010, the beginning of CSRs fiscal year. Potential shares that have not been included in the diluted loss per share, as their effect would have been anti-dilutive, totalled 1,819,615.
|
-131-
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL INFORMATION
1.
|
Historical CSR information
|
Represents the historical condensed consolidated balance sheet and income statement, which have been extracted from the audited
consolidated financial statements of CSR which are incorporated by reference in this proxy statement/prospectus.
2.
|
Zoran reconciliation to IFRS
|
Zorans audited consolidated financial statements have been prepared in accordance with U.S. GAAP which differs in certain material respects from IFRS as issued by the IASB. In addition, certain
reclassifications are required to conform the presentation of Zorans historical financial information to that of CSR under IFRS. The effects of these reclassifications and the application of IFRS are as follows:
Condensed Consolidated Balance Sheet Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
IFRS Adjustments
|
|
|
|
|
|
|
|
|
|
Historical
Zoran as
reported
under U.S.
GAAP (a)
|
|
|
|
|
|
Share-
based
compensation
(b)
|
|
|
Business
combinations (c)
|
|
|
Impairment
(d)
|
|
|
Retirement
plans (e)
|
|
|
Reclassifications
(f)
|
|
|
Historical
Zoran as
shown in the
Pro forma
|
|
|
|
|
|
|
|
|
|
(in U.S.$ thousands)
|
|
|
|
|
|
|
|
|
|
|
Non-current assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
|
20,144
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,297
|
|
|
|
(i)(ii)(iii)
|
|
|
|
11,343
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
44,784
|
|
Other intangible assets
|
|
|
33,681
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,974
|
|
|
|
(i)(ii)
|
|
|
|
|
|
|
|
|
|
|
|
1,835
|
|
|
|
(v
|
)
|
|
|
39,490
|
|
Property, plant and equipment
|
|
|
16,959
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,835
|
)
|
|
|
(v
|
)
|
|
|
15,124
|
|
Other long term assets
|
|
|
34,535
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
34,535
|
|
Deferred tax asset
|
|
|
47,471
|
|
|
|
|
|
|
|
10,970
|
|
|
|
(ii
|
)
|
|
|
4,420
|
|
|
|
(iii)
|
|
|
|
|
|
|
|
|
|
|
|
4,917
|
|
|
|
(vi
|
)
|
|
|
67,778
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-current assets
|
|
|
152,790
|
|
|
|
|
|
|
|
10,970
|
|
|
|
|
|
|
|
21,691
|
|
|
|
|
|
|
|
11,343
|
|
|
|
|
|
|
|
4,917
|
|
|
|
|
|
|
|
201,711
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Inventories
|
|
|
48,139
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
48,139
|
|
Trade and other receivables
|
|
|
45,194
|
|
|
|
(i
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(10,027
|
)
|
|
|
(vii
|
)
|
|
|
35,167
|
|
Corporation tax debtor
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,110
|
|
|
|
(vii
|
)
|
|
|
5,110
|
|
Treasury deposits and investments
|
|
|
180,159
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
180,159
|
|
Cash and cash equivalents
|
|
|
81,107
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
81,107
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
354,599
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,917
|
)
|
|
|
|
|
|
|
349,682
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
507,389
|
|
|
|
|
|
|
|
10,970
|
|
|
|
|
|
|
|
21,691
|
|
|
|
|
|
|
|
11,343
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
551,393
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-132-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
IFRS Adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
Historical
Zoran as
reported
under U.S.
GAAP (a)
|
|
|
|
|
|
Share-based
compensation
(b)
|
|
|
|
|
|
Business
combinations
(c)
|
|
|
|
|
|
Impairment
(d)
|
|
|
Retirement
plans (e)
|
|
|
Reclassifications
(f)
|
|
|
Historical
Zoran as
shown in the
Pro forma
|
|
|
|
|
|
|
|
|
|
(in U.S. thousands)
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade and other payables
|
|
|
67,394
|
|
|
|
(ii
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,269
|
)
|
|
|
(viii
(ix
|
)
)
|
|
|
63,125
|
|
Current tax liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21,300
|
|
|
|
(viii
(x
|
)
)
|
|
|
21,300
|
|
Obligations under finance leases
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
72
|
|
|
|
(ix
|
)
|
|
|
72
|
|
Derivative financial instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provisions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
67,394
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,103
|
|
|
|
|
|
|
|
84,497
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net current assets
|
|
|
287,205
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(22,020
|
)
|
|
|
|
|
|
|
265,185
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-current liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade and other payables
|
|
|
38,517
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,000
|
|
|
|
(iii
|
)
|
|
|
|
|
|
|
(466
|
)
|
|
|
(17,103
|
)
|
|
|
(x
|
)
|
|
|
33,948
|
|
Contingent consideration
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term provisions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Obligations under finance leases
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-current liabilities
|
|
|
38,517
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,000
|
|
|
|
|
|
|
|
|
|
|
|
(466
|
)
|
|
|
(17,103
|
)
|
|
|
|
|
|
|
33,948
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
105,911
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,000
|
|
|
|
|
|
|
|
|
|
|
|
(466
|
)
|
|
|
|
|
|
|
|
|
|
|
118,445
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets
|
|
|
401,478
|
|
|
|
|
|
|
|
10,970
|
|
|
|
|
|
|
|
8,691
|
|
|
|
|
|
|
|
11,343
|
|
|
|
466
|
|
|
|
|
|
|
|
|
|
|
|
432,948
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share capital
|
|
|
49
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
49
|
|
Share premium account
|
|
|
858,621
|
|
|
|
(iii
|
)
|
|
|
(1,216
|
)
|
|
|
(ii
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(761
|
)
|
|
|
|
|
|
|
|
|
|
|
856,644
|
|
Retained earnings (deficit)
|
|
|
(457,192
|
)
|
|
|
|
|
|
|
12,186
|
|
|
|
|
|
|
|
8,691
|
|
|
|
|
|
|
|
11,343
|
|
|
|
1,227
|
|
|
|
|
|
|
|
|
|
|
|
(423,745
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equity
|
|
|
401,478
|
|
|
|
|
|
|
|
10,970
|
|
|
|
|
|
|
|
8,691
|
|
|
|
|
|
|
|
11,343
|
|
|
|
466
|
|
|
|
|
|
|
|
|
|
|
|
432,948
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-133-
Condensed Consolidated Income Statement Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
IFRS Adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Historical
Zoran as
reported
under U.S.
GAAP (a)
|
|
|
|
|
|
Share- based
compensation
(b)
|
|
|
|
|
|
Business
combinations
(c)
|
|
|
|
|
|
Impairment
(d)
|
|
|
Retirement
plans
(e)
|
|
|
Reclassifications
(f)
|
|
|
|
|
|
Historical Zoran
under
IFRS
|
|
|
Microtune
(period
from
January 1, 2010
to November 30,
2010)
(Note 4)
|
|
|
Historical
Zoran as
shown in
Pro forma
|
|
|
|
(in U.S.$ thousands)
|
|
Revenue
|
|
|
357,342
|
|
|
|
(iv
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
357,342
|
|
|
|
83,846
|
|
|
|
441,188
|
|
Amortization of acquired intangible assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8,350
|
)
|
|
|
(i
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8,350
|
)
|
|
|
|
|
|
|
(8,350
|
)
|
Cost of sales
|
|
|
(171,307
|
)
|
|
|
|
|
|
|
360
|
|
|
|
(i
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(170,947
|
)
|
|
|
(41,838
|
)
|
|
|
(212,785
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cost of sales
|
|
|
(171,307
|
)
|
|
|
|
|
|
|
360
|
|
|
|
|
|
|
|
(8,350
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(179,297
|
)
|
|
|
(41,838
|
)
|
|
|
(221,135
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
186,035
|
|
|
|
|
|
|
|
360
|
|
|
|
|
|
|
|
(8,350
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
178,045
|
|
|
|
42,008
|
|
|
|
220,053
|
|
Research and development expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other research and development expenses
|
|
|
(115,697
|
)
|
|
|
|
|
|
|
3,700
|
|
|
|
(i
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40
|
|
|
|
|
|
|
|
|
|
|
|
(111,957
|
)
|
|
|
(24,384
|
)
|
|
|
(136,341
|
)
|
Share-based payment charges
|
|
|
|
|
|
|
|
|
|
|
(3,261
|
)
|
|
|
(i
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,261
|
)
|
|
|
(3,625
|
)
|
|
|
(6,886
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total research and development expenses
|
|
|
(115,697
|
)
|
|
|
|
|
|
|
439
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40
|
|
|
|
|
|
|
|
|
|
|
|
(115,218
|
)
|
|
|
(28,009
|
)
|
|
|
(143,227
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales, general and administrative expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other sales, general and administrative expenses
|
|
|
(110,257
|
)
|
|
|
|
|
|
|
6,302
|
|
|
|
(i
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
41
|
|
|
|
6,645
|
|
|
|
(i
(ii
(iii
|
)
)
)
|
|
|
(97,269
|
)
|
|
|
(17,612
|
)
|
|
|
(114,881
|
)
|
Share-based payment charges
|
|
|
|
|
|
|
|
|
|
|
(5,062
|
)
|
|
|
(i
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5,062
|
)
|
|
|
(3,623
|
)
|
|
|
(8,685
|
)
|
Amortization of acquired intangible assets
|
|
|
(725
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
434
|
|
|
|
(ii
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(291
|
)
|
|
|
(407
|
)
|
|
|
(698
|
)
|
Integration and restructuring expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,390
|
)
|
|
|
(i
|
)
|
|
|
(1,390
|
)
|
|
|
|
|
|
|
(1,390
|
)
|
Acquisition-related fees
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,140
|
)
|
|
|
(ii
|
)
|
|
|
(4,140
|
)
|
|
|
(4,851
|
)
|
|
|
(8,991
|
)
|
Litigation settlement
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,115
|
)
|
|
|
(iii
|
)
|
|
|
(1,115
|
)
|
|
|
|
|
|
|
(1,115
|
)
|
Deferred tax adjustment to goodwill
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-134-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
IFRS Adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Historical
Zoran as
reported
under U.S.
GAAP (a)
|
|
|
|
|
Share- based
compensation
(b)
|
|
|
|
|
|
Business
combinations
(c)
|
|
|
|
|
Impairment
(d)
|
|
|
Retirement
plans
(e)
|
|
|
Reclassifications
(f)
|
|
|
|
|
|
Historical Zoran
under IFRS
|
|
|
Microtune
(period
from
January 1, 2010
to November 30,
2010)
(Note 4)
|
|
|
Historical
Zoran as
shown in
Pro forma
|
|
|
|
(in U.S.$ thousands)
|
|
Asset impairment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total sales, general and administrative expenses
|
|
|
(110,982
|
)
|
|
|
|
|
1,240
|
|
|
|
|
|
|
|
434
|
|
|
|
|
|
|
|
|
|
41
|
|
|
|
|
|
|
|
|
|
|
|
(109,267
|
)
|
|
|
(26,493
|
)
|
|
|
(135,760
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating (loss)/ profit
|
|
|
(40,644
|
)
|
|
|
|
|
2,039
|
|
|
|
|
|
|
|
(7,916
|
)
|
|
|
|
|
|
|
|
|
81
|
|
|
|
|
|
|
|
|
|
|
|
(46,440
|
)
|
|
|
(12,494
|
)
|
|
|
(58,934
|
)
|
Investment revenue
|
|
|
6,731
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,731
|
|
|
|
875
|
|
|
|
7,606
|
|
Other gains and losses
|
|
|
577
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(742
|
)
|
|
|
(iv
|
)
|
|
|
(165
|
)
|
|
|
55
|
|
|
|
(110
|
)
|
Exchange gains and losses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
811
|
|
|
|
(iv
|
)
|
|
|
811
|
|
|
|
(153
|
)
|
|
|
658
|
|
Finance costs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(69
|
)
|
|
|
(iv
|
)
|
|
|
(69
|
)
|
|
|
|
|
|
|
(69
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss (profit) before tax
|
|
|
(33,336
|
)
|
|
|
|
|
2,039
|
|
|
|
|
|
|
|
(7,916
|
)
|
|
|
|
|
|
|
|
|
81
|
|
|
|
|
|
|
|
|
|
|
|
(39,132
|
)
|
|
|
(11,717
|
)
|
|
|
(50,849
|
)
|
Tax
|
|
|
(14,300
|
)
|
|
|
|
|
(685
|
)
|
|
|
(ii
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(14,985
|
)
|
|
|
58
|
|
|
|
(14,927
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) profit for the period
|
|
|
(47,636
|
)
|
|
|
|
|
1,354
|
|
|
|
|
|
|
|
(7,916
|
)
|
|
|
|
|
|
|
|
|
81
|
|
|
|
|
|
|
|
|
|
|
|
(54,117
|
)
|
|
|
(11,659
|
)
|
|
|
(65,776
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-135-
Balance Sheet Data and Income Statement Data
For purposes of the unaudited pro forma condensed consolidated financial information, the historical financial information of Zoran has been converted to IFRS using an adoption date of January 1,
2008.
(a)
|
The historical Zoran financial information has been extracted from the audited consolidated balance sheet as of December 31, 2010 and the audited consolidated
statement of operations for the year ended December 31, 2010, except certain items have been aggregated as follows:
|
|
i.
|
Represents the aggregation of accounts receivable and prepaid expenses and other current assets;
|
|
ii.
|
Represents the aggregation of accounts payable and accrued expenses and other current liabilities;
|
|
iii.
|
Represents the aggregation of additional paid-in capital and accumulated other comprehensive income; and
|
|
iv.
|
Represents the aggregation of hardware product revenues, and software and other revenues.
|
(b)
|
Share-based compensation
|
Adjustments to record Zorans share based compensation plans under IFRS include the following:
|
i.
|
Valuation and timing of recognition
|
Under U.S. GAAP, Zoran has recognized the fair value of certain share-based awards as share-based compensation expense over the vesting period on a straight line basis with a corresponding entry to
additional paid-in capital. The fair value of each award using this approach is determined based on a single valuation.
Under
IFRS, for share-based awards with graded vesting (i.e., those where the award vests in instalments), each separately vesting portion of the award is separately fair valued, and accounted for as a separate grant with a different vesting period. This
results in compensation cost being recognized on an accelerated basis compared to the straight line method.
As a result of
additional share-based compensation expense recognized in earlier periods under IFRS on grants occurring in previous years, share-based compensation expense was reduced by $2.0 million in the 52 weeks ended December 31, 2010.
There is no impact on shareholders equity because all of the awards are accounted for as equity awards under both U.S. GAAP and
IFRS. Expense related to all share options has been allocated between research and development expenses and selling, general and administrative expenses, based on the roles of the respective employees to which the share-based payments relate.
|
|
|
|
|
|
|
|
|
|
|
52 weeks ended
December 31, 2010
|
|
|
|
(in U.S.$ thousands)
|
|
|
|
IFRS
|
|
|
US GAAP
|
|
Cost of sales
|
|
|
|
|
|
|
360
|
|
Research and development expenses
|
|
|
3,261
|
|
|
|
3,700
|
|
Sales, general and administrative expenses
|
|
|
5,062
|
|
|
|
6,302
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
8,323
|
|
|
|
10,362
|
|
|
|
|
|
|
|
|
|
|
-136-
Under
U.S. GAAP, deferred taxes associated with deductible share-based payment awards are computed on the basis of the cumulative expense recognized and adjusted up or down when the tax benefit or deficit is realized. Under IFRS, deferred tax is
computed on the basis of the expected tax deduction under applicable tax law. Where the tax deduction is based on intrinsic value, the deferred tax asset is computed using the intrinsic value on the balance sheet date and adjusted for changes in the
entitys share price on each balance sheet date until exercised. Also, under U.S. GAAP certain share option exercises which result in a tax deduction before the actual realization of the related tax benefits are not recognized until that
deduction reduces taxes payable. Under IFRS, recognition of the tax deduction for share option exercises before actual realization is permitted if the other required recognition criteria are met.
The result of these differences has been to increase the total recognized assets by $11.0 million as of December 31, 2010. The
increase is primarily due to the recognition of net operating loss carry-forwards related to unrealized tax deductions for share based payments occurring prior to the adoption date of IFRS, and has been partially offset by the decrease in intrinsic
value of the vested portion of the share options outstanding. This change in value has been allocated to equity and the tax expense depending on the IFRS 2 charges recognized for each option, and has resulted in an increase in the expense
recognized of $0.7 million, for the 52 weeks ended December 31, 2010.
|
(c)
|
Business combinations
|
Adjustments related to previous Zoran acquisitions (Oak Technologies in 2003, Let-it-Wave in 2008 and Microtune in 2010) include the
following differences:
|
i.
|
Acquired in-process research and development (IPR&D)
|
Under U.S. GAAP, for acquisitions completed prior to January 1, 2009, if the definition of an intangible asset is met, IPR&D is recognized as an intangible asset at fair value, and is then
immediately charged to the income statement unless it has an alternative future use. Effective January 1, 2009, IPR&D is capitalized as an intangible asset, and amortized over its useful life.
Under IFRS, if the definition of an intangible asset is met, IPR&D is recognized as an intangible asset at fair value and amortized
over its estimated useful life.
At December 31, 2010 there is an adjustment to goodwill due to deferred tax liabilities
previously recognized on these assets in the amount of $3.4 million, and the net book value of IPR&D assets which relate to these prior acquisitions was approximately $4.2 million. Amortization expense related to these intangible assets during
the 52 weeks ended December 31, 2010 was approximately $8.4 million, which has been recognized within cost of sales due to the nature of the assets.
|
ii.
|
Let-it-Wave workforce assets
|
Under US GAAP applied by Zoran at the time of acquisition, it was concluded that the Let-it-Wave acquisition did not meet the criteria to be accounted for as an acquisition of a business
since it was a start up entity and at that time had not generated any sales. Since the transaction was not accounted for as a business combination, Zoran recognized an intangible workforce asset in connection with its acquisition of Let-it-Wave of
$1.3 million with no corresponding deferred tax impact.
Under IFRS, the acquisition of Let-it-Wave has been treated as a
business combination. The original intangible asset has been derecognized, and the previously recorded amortization expense of $0.4 million has been reversed. Furthermore, goodwill has been recognized in respect of the difference between the
consideration paid, and the fair value of net assets acquired resulting in an increase to
-137-
goodwill excluding the amounts discussed in (i) of $1.3 million. The exclusion of these assets resulted in a reduction in other intangible assets of $0.2 million, representing the remaining
net book value of the assets at December 31, 2010 under U.S. GAAP.
|
iii.
|
Acquired contingencies
|
In the acquisition of Microtune during 2010, Zoran acquired certain contingent liabilities associated with continuing investigations of
Microtunes former executives. Under U.S. GAAP, amounts acquired in business combinations for contingent liabilities are recognized at fair value, if determinable, during the measurement period. In the preliminary purchase price
allocation, Zoran did not record any liability related to the contingent liabilities, as the fair value was not determinable within a reasonably possible range.
Under IFRS, a contingent liability is recognized as of the acquisition date at fair value if it (1) is a present obligation that results from a past event and (2) can be measured reliably. Under
IFRS, except in extremely rare cases, it should be possible to determine a range of possible outcomes to measure a contingent liability reliably.
Based on this difference, there is no change in shareholders equity or in net loss of Zoran. However, a provision of $13.0 million, representing a best estimate of the fair value, has been recorded
under IFRS, with a corresponding increase in the amount of goodwill acquired. The tax impact of this entry is the recording of an additional deferred tax asset in the amount $4.4 million, based on the statutory tax rate of the jurisdiction where the
liability has been recorded and a corresponding reduction in the goodwill recognized. There was no movement in the liability or related deferred tax assets between the date of acquisition and December 31, 2010. The impact of the business
combination adjustments is summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
|
|
|
|
Other intangible assets
|
|
|
|
|
|
|
(in U.S.$ millions)
|
|
|
|
|
Provision
|
|
|
13.0
|
|
|
|
(iii
|
)
|
|
|
|
|
|
|
|
|
Reduction
|
|
|
(4.4
|
)
|
|
|
(iii
|
)
|
|
|
|
|
|
|
|
|
Adjustment to goodwill
|
|
|
3.4
|
|
|
|
(i
|
)
|
|
|
(0.2
|
)
|
|
|
(ii
|
)
|
Increase
|
|
|
1.3
|
|
|
|
(ii
|
)
|
|
|
4.2
|
|
|
|
(i
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13.3
|
|
|
|
|
|
|
|
4.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Under
U.S. GAAP tangible and intangible long-lived assets, other than goodwill, are assessed using a two-step approach to impairment. In step 1, a recoverability test is performed by comparing the expected undiscounted future cash flow to be derived
from the asset with its carrying amount. If, and only if, the asset fails the recoverability test, step 2 is triggered and the entity must record an impairment loss calculated as the excess of the assets carrying value over its estimated fair
value which is generally calculated using discounted cash flows. Goodwill is reviewed for impairment at the reporting unit level using a two-step test that involves the comparison of the reporting units fair value to its carrying amount. If
the carrying amount exceeds fair value, the calculation of any impairment charge to goodwill is determined through the application of a hypothetical purchase price allocation, which includes the valuation of any unrecognized intangible assets.
Under IFRS, assets are reviewed for impairment by comparing the carrying amount to recoverable value, which is defined as the
higher of fair value less costs to sell and value in use. Any excess of carrying value over the recoverable amount is recorded as an impairment. The value in use calculation involves discounting the expected future cash flows to be generated by the
asset. Goodwill is assessed for impairment at a cash generating unit level or for groups of cash generating units that represent the lowest level within the entity at which goodwill is monitored for internal management purposes, which grouping may
not be larger than an
-138-
operating segment. An impairment loss is recognized for the excess of the carrying value of the cash generating unit or groups of cash generating units over the recoverable amount. Any impairment
loss is applied first to reduce the carrying amount of any goodwill allocated to the cash-generating unit and then to the other assets of the unit pro rata on the basis of the carrying amount of each asset in the unit, except that each asset may not
be reduced below its fair value.
As a result of the differences described above, previous goodwill and asset impairment
charges have differed between U.S. GAAP and IFRS in respect of the Mobile cash generating unit, resulting in a net increase to goodwill of $11.3 million as compared to the amounts remaining on the books as of December 31, 2010. There were
no impairment charges during the 52 weeks ended December 31, 2010 under U.S. GAAP or IFRS.
Under
U.S. GAAP, Zoran applied a simplified approach to the valuation of its defined benefit plan related to severance payments to Israeli employees, whereby the liability is calculated based on the salary of each employee multiplied by the years of
such employees employment. Under IFRS, actuarial accounting has been applied, which results in, among other things, the application of a discount to future obligations and allows for estimates of future voluntary terminations. Due to the tax
jurisdiction of the retirement plans, the tax impact of these plans was insignificant. The expense amount has been allocated based on the function of the employees covered by the retirement plan and resulted in a decrease of $0.1 million in each of
other research and development costs and other sales, general and administrative costs respectively and a $0.5 million decrease in long-term provisions with an offsetting effect on equity.
The
following reclassifications have been made to conform the presentation of the consolidated balance sheet and income statement of Zoran to CSR:
|
i.
|
$1.4 million included within sales, general and administrative expense that relates to restructuring activities has been reclassified to integration and restructuring
expenses, consistent with the CSR presentation;
|
|
ii.
|
$4.1 million included within sales, general and administrative expense that relate to acquisitions has been reclassified to acquisition-related fees, consistent with
the CSR presentation;
|
|
iii.
|
$1.1 million included within sales, general and administrative expense that relates to a litigation settlement has been reclassified to litigation settlement,
consistent with the CSR presentation;
|
|
iv.
|
$0.1 million of finance costs and $0.8 million of exchange gains have been reclassified from within other gains and losses, to conform with the CSR presentation;
|
|
v.
|
$1.8 million of assets related to software that are not considered to be integral to the related hardware has been reclassified to other intangible assets;
|
|
vi.
|
$4.9 million of net deferred tax assets has been reclassified as noncurrent assets consistent with CSRs presentation;
|
|
vii.
|
$5.1 million related to income taxes that were included within trade and other receivables has been reclassified into corporation tax debtor consistent with CSRs
presentation;
|
|
viii.
|
$4.2 million related to income taxes payable, which Zoran included within trade and other payables has been reclassified into current tax liabilities consistent with
CSRs presentation;
|
|
ix.
|
$0.1 million included within trade and other payables has been reclassified into obligations under finance leases, consistent with CSRs presentation; and
|
|
x.
|
$17.1 million related to contingent tax liabilities has been reclassified from long term payable to current tax liabilities, consistent with CSRs presentation.
|
-139-
3.
|
Adjustments to reflect the accounting for the proposed acquisition of Zoran by CSR
|
a)
|
The components of the estimated purchase price are as follows:
|
|
|
|
|
|
|
|
All amounts in
U.S.$ (thousands)
|
|
|
|
Purchase price:
|
|
|
|
|
Fair value of cash consideration
|
|
|
313,721
|
|
Fair value of shares issued
|
|
|
138,343
|
|
Fair value of stock options exchanged
|
|
|
41,395
|
|
Less: unvested portion of the fair value of stock options
|
|
|
(20,559
|
)
|
Less: excess of fair value of vested stock options over the original awards
|
|
|
(3,278
|
)
|
|
|
|
|
|
Aggregate purchase price
|
|
|
469,622
|
|
|
|
|
|
|
The fair value of shares issued above has been calculated assuming that all holders of the outstanding
shares of Zoran common stock elect to receive CSR ADSs in exchange, however to the extent the shareholders of Zoran elect to demand and perfect their right to dissent from the merger, as discussed in The MergerAppraisal Rights they
may be paid the fair value of such shares instead of cash. The fair value of cash consideration has been calculated by assuming 50,115,202 Zoran common shares outstanding as of July 20, 2011 multiplied by $6.26. See note (g) for additional
information regarding the fair value of shares issued and options used in the determination of the purchase price.
The
preliminary purchase price allocation to assets acquired and liabilities assumed is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Book value
of net assets
acquired (1)
|
|
|
Adjustments
(2)
|
|
|
|
|
|
Fair value
|
|
|
|
|
|
|
(in U.S.$ thousands)
|
|
Other intangible assets
|
|
|
39,490
|
|
|
|
63,045
|
|
|
|
(b
|
)
|
|
|
102,535
|
|
Property, plant and equipment
|
|
|
15,124
|
|
|
|
|
|
|
|
|
|
|
|
15,124
|
|
Goodwill
|
|
|
44,784
|
|
|
|
(44,784
|
)
|
|
|
|
|
|
|
|
|
Other non-current assets
|
|
|
102,313
|
|
|
|
(11,707
|
)
|
|
|
(c
|
)
|
|
|
90,606
|
|
Current assets
|
|
|
349,682
|
|
|
|
12,515
|
|
|
|
(d
|
)
|
|
|
362,197
|
|
Current liabilities
|
|
|
(84,497
|
)
|
|
|
1,641
|
|
|
|
(e
|
)
|
|
|
(82,856
|
)
|
Non-current liabilities
|
|
|
(33,948
|
)
|
|
|
2,054
|
|
|
|
(f
|
)
|
|
|
(31,894
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets acquired
|
|
|
432,948
|
|
|
|
22,764
|
|
|
|
|
|
|
|
455,712
|
|
Aggregate purchase price
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(469,622
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,910
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less Previously existing goodwill
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(44,784
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustment to goodwill
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(30,874
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Represents the carrying value of net assets acquired under IFRS as at December 31, 2010, and is derived from Note 2, Zoran reconciliation to IFRS.
|
(2)
|
Represents the amount required to adjust the book value of net assets acquired to their estimated fair values. For additional information regarding these adjustments,
refer to notes (c)(j) below.
|
(3)
|
Represents goodwill arising on the acquisition as a result of the excess aggregate purchase price over the fair value of net assets acquired.
|
Costs incurred in connection with the acquisition are expected to be approximately $18.0 million of which nil has been expensed for the 52
weeks ended December 31, 2010, $5.7 million is expected to be allocated to share issuance costs and $12.2 million will be expensed as incurred in the year ending December 31, 2011.
-140-
b)
|
The estimated fair values of intangible assets established in purchase accounting by type are included below:
|
|
|
|
|
|
|
|
All amounts
in
U.S.$
(thousands)
|
|
|
|
Fair value of intangible assets acquired:
|
|
|
|
|
Acquired in-process research and development
|
|
|
9,500
|
|
Developed and core technology
|
|
|
55,400
|
|
Customer relationships
|
|
|
32,500
|
|
Trade names
|
|
|
3,300
|
|
|
|
|
|
|
|
|
|
100,700
|
|
Less: book value of intangible assets acquired, excluding software
|
|
|
(37,655
|
)
|
|
|
|
|
|
Fair value adjustment
|
|
|
63,045
|
|
|
|
|
|
|
c)
|
Deferred tax assets in the amount of $2.3 million have been recorded related to the expected future tax deduction for replacement share-based payment awards issued in
connection with the transaction.
|
Additionally a reduction in net deferred tax assets in the amount of $14.0
million has been recorded due to the recognition, in certain tax jurisdictions, of a deferred tax liability on the fair value adjustments for the intangible assets described in (b) above.
Section 382 of the U.S. Internal Revenue Code generally imposes an annual limitation on the amount of net operating loss carryfowards
that might be used to offset taxable income when a corporation has undergone significant changes in share ownership. As a result the change in share ownership as proposed by this transaction could put limitations on the availability of Zorans
net operating loss carryforwards in the future. A section 382 analysis will be performed upon the closing of the proposed transaction.
d)
|
The $12.5 million adjustment relates to the step up in fair value of inventory, as compared to the carrying value. The adjustment made primarily relates to the assumed
profit attributable to past production effort, less costs expected to dispose of the inventory to align with IFRS 3 as applied by CSR. There is no corresponding effect in the pro forma statement of income, as there will be no significant continuing
impact.
|
e)
|
Zoran defers the recognition of revenue and the related costs of revenue on shipments to distributors that have rights of return and price protection privileges on
unsold products until the products are sold by the distributor to its customers. When an acquirer recognizes a legal performance obligation related to a revenue arrangement of an acquired entity, the amount assigned to that liability should be based
on its fair value at the date of acquisition. Adjustments reduce deferred revenue by $1.6 million to reflect the balances at fair value. There is no corresponding effect in the unaudited pro forma condensed statement of income, as there will be no
significant continuing impact on the Combined Company.
|
f)
|
Zoran recognises a liability for deferred long-term rent. An adjustment of $2.1 million has been made to remove this liability since its fair value is $nil, to align
with IFRS 3 as applied by CSR. There is no corresponding effect in the unaudited pro forma condensed statement of income, as there will be no significant continuing impact on the Combined Company.
|
-141-
g)
|
Adjustments to the equity balance consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share
capital
|
|
|
Share
premium and
other reserves
|
|
|
Retained
earnings
|
|
|
|
(in U.S.$ thousands)
|
|
Elimination of Zoran historical equity
|
|
|
(49
|
)
|
|
|
(856,644
|
)
|
|
|
423,745
|
|
Newly issued equity
|
|
|
48
|
|
|
|
138,295
|
|
|
|
|
|
Fair value of share based payment awards exchanged
(1)
|
|
|
|
|
|
|
41,395
|
|
|
|
|
|
Less: unvested portion of the fair value of share based payment awards
(2)
|
|
|
|
|
|
|
(20,559
|
)
|
|
|
|
|
Less: excess of fair value of vested share based payment awards over the original awards
(3)
|
|
|
|
|
|
|
|
|
|
|
(3,278
|
)
|
Share issuance costs (Note 3(a))
|
|
|
|
|
|
|
(5,743
|
)
|
|
|
(12,233
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets acquired
|
|
|
(1
|
)
|
|
|
(703,256
|
)
|
|
|
408,234
|
|
|
(1)
|
The consideration to purchase Zoran will be funded through cash of $6.26 per outstanding Zoran common share and the issuance of shares based on the exchange of 0.14725
of a CSR ADS which is equivalent to 0.589 CSR ordinary shares for each issued and outstanding share of common stock of Zoran. Each CSR ADS represents four CSR ordinary shares. The number of CSR ADSs expected to be exchanged is 7,379,463, which is
based upon the number of issued and outstanding shares of common stock of Zoran as of July 20, 2011, multiplied by the exchange ratio of 0.14725. Based on a nominal value of the CSR ordinary shares underlying CSR ADSs of £0.001 and a USD/GBP
exchange rate of $1.6139 = £1.00, $47,639 of consideration represents nominal value with the remainder being share premium.
|
|
(2)
|
As of the closing of the transaction, each outstanding and unexercised stock option to acquire Zoran common stock and each restricted stock unit, or RSU, with respect
to Zoran common stock will be assumed by CSR. See the section entitled The Merger AgreementTreatment of Zoran Stock Options and Other Equity-Based Awards of this proxy statement/prospectus for further details.
|
The fair value of stock options exchanged has been determined using a Black-Scholes option pricing model,
utilizing assumptions about the options expected lives, volatility of CSR ADSs, interest rates and dividend yields. The assumptions used include the following:
|
|
|
|
|
CSR share price
|
|
£
|
2.904
|
(i)
|
U.S. dollar/GBP exchange rate
|
|
|
1.6139
|
(i)
|
Expected volatility
|
|
|
57
|
%
|
Expected life
|
|
|
0.01-4.85
|
(ii)
|
Risk free rate
|
|
|
2.8
|
%
|
Expected dividends
|
|
|
2.0
|
%
|
|
(i)
|
Represents the share price published on the Daily Official List of the London Stock Exchange as of July 20, 2011 and the USD / GBP exchange rate as of the same date, as
reported by Financial Times
|
|
(ii)
|
Represents the expected remaining term of the options, which can vary significantly based on original grant date, as the replacement awards will be issued with the same
terms as the original awards.
|
Based on these inputs, the fair value of CSRs share options awarded is
calculated to be $41.4 million, of which $20.6 million will not have vested at the estimated date of the merger. The fair value of the unvested portion of awards at the exchange date will be recognised as share-based payment expense post-acquisition
over the remaining term of the awards.
|
(3)
|
Certain non-recurring charges of $3.3 million, which represents the incremental value of replacement share-based awards issued in connection with the acquisition, have
been reflected as an adjustment to retained earnings as of the date of acquisition. These charges have not been reflected in the unaudited pro forma condensed consolidated income statement because they relate directly to the acquisition and will be
included in CSRs income statement in the 12 months following the acquisition.
|
-142-
h)
|
Represents the differential in amortization expense associated with intangible assets recorded in purchase accounting. The differential in amortization expense is
calculated as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average estimated
useful life (years)
|
|
|
Fair
value
|
|
|
Amortization
charge
|
|
|
|
(In US$, thousands)
|
|
Acquired in-process research and development
|
|
|
6.3
|
|
|
|
9,500
|
|
|
|
1,513
|
|
Developed and core technology
|
|
|
8.1
|
|
|
|
55,400
|
|
|
|
6,856
|
|
Customer relationships
|
|
|
7.0
|
|
|
|
32,500
|
|
|
|
4,643
|
|
Trade names
|
|
|
5.0
|
|
|
|
3,300
|
|
|
|
660
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets acquired
|
|
|
|
|
|
|
100,700
|
|
|
|
13,672
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reversal
of historical
expense
|
|
|
Amortization
of assets in
purchase
accounting
|
|
|
Pro forma
adjustment
|
|
|
|
(in US$ thousands)
|
|
Cost of sales
|
|
|
(8,350
|
)
|
|
|
6,856
|
|
|
|
1,494
|
|
Research and development expenses
|
|
|
|
|
|
|
1,513
|
|
|
|
(1,513
|
)
|
Sales, general and administrative expenses
|
|
|
(698
|
)
|
|
|
5,303
|
|
|
|
(4,605
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets acquired
|
|
|
(9,048
|
)
|
|
|
13,672
|
|
|
|
(4,624
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
An average increase/decrease in the useful lives of the intangibles by 1 year would decrease/increase the
amortization expense by $1.7 million and $2.2 million respectively.
i)
|
Represents the differential in share-based compensation expense assuming the merger took place at the start of the period.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reversal of Zoran
historical expense
|
|
|
Share-based
compensation
under new
plans
|
|
|
Pro forma
adjustment
|
|
|
|
(in US$ thousands)
|
|
Allocated to:
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development expenses
|
|
|
(6,886
|
)
|
|
|
(5,882
|
)
|
|
|
1,004
|
|
Sales, general and administrative expenses
|
|
|
(8,685
|
)
|
|
|
(9,130
|
)
|
|
|
(445
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets acquired
|
|
|
(15,571
|
)
|
|
|
(15,012
|
)
|
|
|
559
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of the closing of the transaction, each outstanding and unexercised stock option to acquire Zoran
common stock and each restricted stock unit, or RSU, with respect to Zoran common stock will be assumed by CSR. See the section entitled The Merger AgreementTreatment of Zoran Stock Options and Other Equity-Based Awards of this
proxy statement/prospectus for further details.
The issuance of replacement awards to the employees of Zoran is an integral
part of the acquisition agreement. The replacement awards will have a continuing impact on CSR, as the fair value of the unvested portion of replacement awards issued will be recognized in income over the remaining term of the awards. Accordingly,
an adjustment has been made to reverse the historical compensation expense recognized by Zoran on the previously existing awards and to include the estimated compensation expense based upon the terms of the replacement awards as set out in the
acquisition agreement.
j)
|
Represents the reversal of $9.0 million acquisition related costs during 2010, which were incurred in the historical Zoran and Microtune financial statements as these
are not considered to have a continuing impact on the unaudited pro forma condensed consolidated income statement.
|
-143-
k)
|
Represents the income tax benefit recognized during the year as a result of other adjustments as follows:
|
|
a.
|
Due to the pro-forma amortization adjustment (as described in (h) above), CSR has recognised a tax benefit for the amortization of assets in purchase accounting. Based
on the jurisdictions of the acquired intangible assets, CSR has recognised a deferred tax benefit of $2.8 million during the 52 weeks ended December 31, 2010.
|
|
b.
|
Due to the effect of the replacement options (as described in (i) above), CSR has recognised an additional deferred tax benefit in the amount of $1.8 million, which is
based on the assumed vesting of the replacement options if the acquisition had occurred at the start of the 52 weeks ended December 31, 2010, as compared to the actual income tax benefit recognised CSR under IFRS for the same period.
|
|
c.
|
Due to the acquisition of Microtune by Zoran, and the associated adjusted tax basis of the Combined Company, CSR has, on a pro forma basis, recognised a tax benefit of
$2.7 million which was available to offset the losses incurred by Microtune during the 11 months ended November 30, 2010.
|
The pro forma provision for income taxes does not reflect the amounts that would have resulted had the Combined Company filed consolidated income tax returns during the period presented.
4.
|
Microtune income statement for the period January 1, 2010 to November 30, 2010
|
The unaudited condensed Microtune income statement for the period January 1, 2010 to November 30, 2010 has been prepared in accordance with U.S. GAAP and was derived in part from the
unaudited condensed consolidated income statement of Microtune for the nine months ended September 30, 2010, which is incorporated by reference in this proxy statement/prospectus, and in part was derived from the unaudited accounting records of
Microtune. This income statement has been adjusted to IFRS for purposes of presentation in the unaudited pro forma condensed consolidated income statement.
5.
|
Other information not adjusted for
|
In
connection with the merger, certain outside directors will receive accelerated option vesting and Zoran executive officers may become eligible to receive certain benefits under the Zoran Executive Retention and Severance Plan as noted in The
MergerInterests of Directors and Officers of Zoran in the Merger.
Under the terms of the Zoran Corporation 2005 Outside Directors
Equity Plan, any outstanding and unvested stock options awarded to Zorans outside directors under the plan will become immediately exercisable in full upon the closing of the merger as noted in The MergerInterests of Directors and
Officers of Zoran in the MergerTreatment of Stock Options and Restricted Stock Units.
The unaudited pro forma condensed
consolidated balance sheet and income statement do not reflect any changes in the trading position of CSR or any other changes from other transactions, other than those outlined in notes 1-4, since December 31, 2010.
-144-
INFORMATION ABOUT THE COMPANIES
CSR plc
Churchill House, Cambridge Business Park
Cowley Road
Cambridge CB4 0WZ
United Kingdom
Tel: +44(0) 1223 692000
CSR is a leading provider of multifunction connectivity, audio and location platforms. CSRs technology portfolio includes Bluetooth, GPS and GNSS, FM Radio, Wi-Fi, Audio and NFC. CSRs
customers include industry leaders in consumer electronics, mobile handsets and automotive.
CSR is headquartered in
Cambridge, the United Kingdom, and has offices in Europe, Asia and North America. As at December 31, 2010, CSR employed 1,554 people in eleven countries.
CSR ordinary shares, nominal value £0.001 per share, are listed on the London Stock Exchange under the symbol CSR.L. CSR has applied to list the CSR ADSs on The NASDAQ Stock Market
under the symbol CSRE.
Zoran Corporation
1390 Kifer Road
Sunnyvale, California 94086
Phone: (408) 523-6500
Zoran is a leading provider of solutions for the
digital entertainment and digital imaging markets. Zoran has pioneered high-performance digital audio and video, imaging applications, and Connect Share Entertain technologies for the digital home.
Zoran provides integrated circuits, software and platforms for digital cameras, DTVs, set-top boxes, broadband receivers (silicon
tuners), DVDs and high definition media players, digital printers, scanners and related MFP. Zoran sells its products to original equipment manufacturers that incorporate them into products for consumer and commercial applications. Zoran also
licenses certain software and other intellectual property.
On November 30, 2010, Zoran completed the acquisition of Microtune
for a transaction equity value of approximately $162 million. Microtune is a pioneer in the development and deployment of silicon tuners, a technology that is complementary and synergistic to Zoran strategic objectives in both the set-top box
and DTV markets.
Zoran is headquartered in Sunnyvale, California, with operations in Europe, Asia and Israel. As of December
31, 2010, it employed 1,532 people.
Zoran was incorporated in California in December 1981 and reincorporated in Delaware in
November 1986. Zorans website can be found at www.zoran.com. Information contained on Zorans website is not incorporated by reference unless specifically referenced herein.
Shares of Zoran common stock, par value $0.001 per share, are listed on The NASDAQ Global Select Market under the symbol
ZRAN.
Zeiss Merger Sub, Inc.
Zeiss Merger Sub, Inc. was formed on behalf and at the direction of CSR. It was incorporated in the State of Delaware on February 17,
2011 solely to participate in the merger and has never conducted any other business.
-145-
LEGAL PROCEEDINGS
CSR Legal Proceedings
CSR may be subject to legal proceedings, as well as demands, claims and threatened litigation that arise in the normal course of its business. During the twelve months immediately preceding the date of
this proxy statement/prospectus, CSR was a party to the following legal proceedings. In addition to the legal proceedings described below, see The MergerLegal Proceedings Relating to Merger for a description of certain legal
proceedings related to the merger and Risk Factors for a description of certain risks related to legal proceedings.
Bandspeed, Inc. v. Sony Electronics, Inc., et al
On August 7, 2009, Bandspeed, Inc. filed a patent infringement lawsuit (Case No. 1:09-cv-593 LY) in the U.S. District Court for the Western District of Texas against a number of defendants including Sony
and Apple. Bandspeed, Inc. asserting its patents against products containing certain Bluetooth functionality. Several defendants requested indemnification from CSR, and in 2010, the Court granted CSRs motion to intervene into this patent
infringement lawsuit. A trial is anticipated in the second half of 2012, although a specific trial date has not been set.
On
June 30, 2010, Bandspeed filed a patent infringement lawsuit (Case No. 2:10-cv-215 TJW) in the U.S. District Court for the Eastern District of Texas. This lawsuit asserts the same patents referenced above against additional defendants. Although CSR
is not named as a defendant in this action, certain of CSR customers are and have requested indemnification from CSR. The case is in its preliminary stages. Trial has been set for July 1, 2013.
On April 1, 2011, CSR filed a patent infringement lawsuit in the U.S. District Court for the Central District of California against
Bandspeed (Case No. 8:11-cv-00494-DOC-MLG) asserting that Bandspeeds products infringe CSRs patents. The case is in its preliminary stages; a trial date has not been set.
NordNav Technologies AB
In the fourth quarter of 2010, the original sellers of NordNav filed for arbitration proceedings in Sweden against CSR with respect to a potential claim involving a $17.5 million earnout. This matter is
currently scheduled for arbitration in October 2011, with a ruling anticipated in November 2011.
MOSAID Technologies,
Incorporated v. Dell, Inc. et al
On March 16, 2011, MOSAID filed a patent infringement lawsuit in the U.S. District
Court for the Eastern District of Texas (Case No. 2:11-cv-179) against thirty-three defendants including CSR. MOSAID alleges that defendants products embracing WiFi technology, including CSRs 9000 and 6026 products, infringe
MOSAIDs patents. The case is in its very preliminary stages; a trial date has not been set.
Azure Networks LLC
and TCEF v. CSR plc et al
On March 22, 2011, Azure Networks, LLC and Tri-County Excelsior Foundation filed a patent
infringement lawsuit in the U.S. District Court for the Eastern District of Texas (Case No. 6:11-cv-139) against a number of defendants including CSR, Atheros, Broadcom, Marvell, Qualcomm, Ralink, and Texas Instruments. Plaintiffs allege that
certain of the defendants products that embrace Bluetooth technology, including the CSR 9000 product, infringe plaintiffs patent. The case is in its very preliminary stages; a trial date has not been set.
-146-
Broadcom
Since 2006, CSR and Broadcom had been involved in a number of patent litigation proceedings both in U.S. District Court and before the
U.S. International Trade Commission. Such proceeding including legal proceedings which were ongoing between SiRF and Broadcom at the time of the acquisition of SiRF by CSR in June, 2009.
In January 10, 2011, CSR and Broadcom executed a formal agreement to settle all outstanding litigation. The terms included a covenant
that expires in January 2016, in which each party covenants not to sue the other or any third parties, including the other partys customers, for infringement based on the use of the others products. In connection with the comprehensive
settlement, CSR made an initial payment of $5 million in January 2011 and agreed to make future payments of $12.5 million per year for five years.
Following settlement, CSR negotiated a legal recovery of $14.5 million from a third party in favor of CSR. No further recoveries in favor of CSR relating to this settlement are anticipated.
Wi-LAN Inc. v. Acer, Inc., et al
On June 2, 2010, Wi-LAN Inc. amended a previously filed patent infringement lawsuit (Case No. 2:10-cv-00124) in the U.S. District Court for the Eastern District of Texas to add (among others) SiRF and CSR
as defendants. The amended complaint asserts that CSR and other defendants infringe Wi-LAN patents.
In February 2011, CSR
entered into a settlement agreement with Wi-LAN. Pursuant to the settlement agreement, Wi-LAN dismissed the litigation with prejudice as to CSR and named CSR customers for a settlement amount which is confidential between the parties. Terms of the
settlement include a license to the patents-in-suit that extends to CSR customers.
Zoran Legal Proceedings
Zoran may be subject to legal proceedings, as well as demands, claims and threatened litigation that arise in the normal
course of its business. During the twelve months immediately preceding the date of this proxy statement/prospectus, Zoran was a party to the following legal proceedings. In addition to the legal proceedings described below, see The
MergerLegal Proceedings Relating to Merger for a description of certain legal proceedings related to the merger and Risk Factors for a description of certain risks related to legal proceedings.
Xpoint Technologies, Inc. v. Cypress Semiconductor Corporation, et al.
On September 18, 2009, Xpoint Technologies, Inc. filed an amended complaint against Zoran and 43 other defendants in the U.S. District
Court for the District of Delaware (Case No. 1:09-cv-00628-SLR). Plaintiff has alleged that Zorans manufacture and sale of digital camera processors, including its Coach 8, Coach 9, Coach 10 and Coach 12 lines of processors, infringe
plaintiffs patent. Effective as of April 13, 2011, the parties entered into a settlement agreement resolving the disputes at issue in the lawsuit. Under the agreement, Xpoint granted Zoran a non-exclusive fully paid up license under the
patent, Zoran agreed to make a one-time payment to Xpoint, and Xpoint agreed to dismiss the lawsuit.
Advanced Processor
Technologies LLC v. Analog Devices, Inc., et al.
On January 26, 2011, Advanced Processor Technologies LLC filed an
amended complaint against Zoran and eight other defendants in the U.S. District Court for the Eastern District of Texas (Case No. 2:11-cv-00019-TJW). The complaint alleges that Zoran and each of the other defendants manufactures, uses, sells,
imports, and/or offers for sale data processors with memory management units or products containing such devices, that infringe plaintiffs patents. The complaint alleges that each of the defendants accused products incorporates one of
several processor cores manufactured by ARM Ltd., or products that incorporate ARM processor cores. The
-147-
complaint does not specify which of Zorans products allegedly infringe plaintiffs patents. The complaint seeks unspecified damages for past infringement and either a permanent
injunction against future infringement or the award of a reasonable royalty for such infringement. ARM Ltd. has agreed to provide the defense for Zoran and the other defendants in this lawsuit and to indemnify them against any damages and costs that
may be finally awarded. On April 15, 2011, Zoran filed an answer that included affirmative defenses denying plaintiffs allegations of infringement. The case is in its preliminary stages, and discovery has not yet commenced.
Freescale Semiconductor, Inc. v. Zoran, et al.
On June 8, 2011, Freescale Semiconductor, Inc. filed a complaint with the U.S. International Trade Commission naming the following companies as respondents: Zoran, Funai Electric Co., Ltd., Funai
Corporation, Inc. and MediaTek Inc. The ITC Complaint alleges that each respondent, including Zoran, infringes Freescales patent. In particular, the ITC Complaint accuses Zoran integrated circuits including Zorans SupraHD digital
television integrated circuits, of infringement. The ITC Complaint seeks remedies including an exclusion order against future import of the infringing integrated circuits, chipsets and products including the same. The investigation is in its
preliminary stages.
On June 8, 2011, Freescale also filed a complaint in the U.S. District Court for the Western District of
Texas against Zoran and MediaTek Inc. (Case No. 1:2011cv00472) alleging infringement of the same Freescale patent referenced above. The District Court complaint again accuses Zoran integrated circuits including Zorans SupraHD digital
television integrated circuit, of infringement. The case is in its preliminary stages; a trial date has not been set.
-148-
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT OF ZORAN
The following table sets forth, as of July 20, 2011, certain information regarding the ownership of
Zoran common stock by each director, named executive officer and all of Zorans current executive officers and directors of as a group. Unless otherwise indicated and subject to applicable community property laws, the persons named in the
following table have sole voting and investment power with respect to all shares of Zoran common stock shown below.
The
percentage of beneficial ownership in the table below is based upon 50,115,202 shares of Zoran common stock outstanding on July 20, 2011. For each individual, this percentage includes Zoran common stock of which such individual has the right to
acquire beneficial ownership either currently or within sixty days after July 20, 2011, including, but not limited to, upon the exercise of a stock option; however, such Zoran common stock will not be deemed outstanding for the purpose of computing
the percentage owned by any other individual.
|
|
|
|
|
|
|
|
|
|
|
Amount and Nature of Beneficial Ownership
|
|
Name of Beneficial Owner
|
|
Number of
Shares
|
|
|
Percentage Owned (%)
|
|
Jeffrey C. Smith
(1)
|
|
|
4,447,500
|
|
|
|
8.87
|
%
|
Levy Gerzberg, Ph.D.
(2)
|
|
|
1,324,822
|
|
|
|
2.59
|
%
|
Isaac Shenberg, Ph.D.
(3)
|
|
|
546,843
|
|
|
|
1.08
|
%
|
Karl Schneider
(4)
|
|
|
515,139
|
|
|
|
1.02
|
%
|
Arthur B. Stabenow
(5)
|
|
|
214,596
|
|
|
|
*
|
|
James B. Owens, Jr.
(6)
|
|
|
141,000
|
|
|
|
*
|
|
Raymond A. Burgess
(7)
|
|
|
107,000
|
|
|
|
*
|
|
Dale Fuller
(8)
|
|
|
50,000
|
|
|
|
*
|
|
Jon Castor
(9)
|
|
|
10,000
|
|
|
|
*
|
|
All directors and executive officers as a group (9 persons)
(10)
|
|
|
7,356,900
|
|
|
|
13.98
|
%
|
(1)
|
Mr. Smith, as a member of Starboard Principal Co GP LLC, may be deemed the beneficial owner of (i) 3,335,650 Shares owned by Starboard Value & Opportunity Fund
LTD and (ii) 1,111,850 Shares held in the Starboard Value LP. See note 2 of the following table.
|
(2)
|
Consists of 204,987 shares held directly and 1,119,835 shares issuable upon exercise of options.
|
(3)
|
Consists of 41,275 shares held directly and 505,568 shares issuable upon exercise of options.
|
(4)
|
Consists of 31,389 shares held directly and 483,750 shares issuable upon exercise of options.
|
(5)
|
Consists of 64,696 shares held directly and 150,000 shares issuable upon exercise of options.
|
(6)
|
Consists of 6,000 shares held directly and 135,000 shares issuable upon exercise of options.
|
(7)
|
Consists of 2,000 shares held directly and 105,000 shares issuable upon exercise of options.
|
(8)
|
Consists of 50,000 shares held directly.
|
(9)
|
Consists of 10,000 shares held directly.
|
(10)
|
Includes an aggregate of 2,499,153 shares issuable upon exercise of options.
|
-149-
The following table sets forth certain information about persons Zoran knows were the
beneficial owners of five percent or more of Zorans issued and outstanding common stock as of July 20, 2011, unless otherwise indicated in the footnotes below:
|
|
|
|
|
|
|
|
|
|
|
Amount and Nature of Beneficial Ownership
|
|
Name and Address of Beneficial Owner
|
|
Number of
Shares
|
|
|
Percentage Owned (%)
|
|
BlackRock, Inc., LLP
(1)
40 East 52nd Street
New York, New York 10022
|
|
|
5,068,736
|
|
|
|
10.11
|
%
|
Jeffrey C. Smith Starboard Value LP
(2)
C/O Steven Wolosky, ESQ
599 Lexington Avenue, 20th Floor
New York, New York 10022
|
|
|
4,447,500
|
|
|
|
8.87
|
%
|
Dimensional Fund Advisors LP
(3)
Palisades West, Building One
6300 Bee Cave Road
Austin, Texas 78746
|
|
|
2,802,966
|
|
|
|
5.59
|
%
|
The D3 Family Fund, L.P.
(4)
19605 NE 8th Street
Camas, WA 98607
|
|
|
2,550,604
|
|
|
|
5.09
|
%
|
(1)
|
Based on information contained in a Schedule 13G/A filed by BlackRock, Inc. with the SEC on January 10, 2011. BlackRock, Inc. is a parent holding company for
subsidiaries. BlackRock, Inc. has sole voting and dispositive power with respect to the reported shares.
|
(2)
|
Based on information contained in an amended Schedule 13D/A filed on April 5, 2011, by Starboard Value LP. According to the Schedule 13D/A, as of the close of business
on April 4, 2011, (i) Starboard Value and Opportunity Fund LTD had beneficial ownership and voting and dispositive control of 3,335,650 shares, (ii) Starboard Value LP had beneficial ownership and voting and dispositive control of
1,111,850 shares, and as the investment manager of Starboard Value and Opportunity Fund LTD, may be deemed the beneficial owner of the 3,335,650 shares owned by Starboard Value and Opportunity Fund LTD, (iii) Starboard Value GP LLC, as the
general partner of Starboard Value LP may be deemed to have beneficial ownership and voting and dispositive control over the shares beneficially owned by Starboard Value LP and Starboard Value and Opportunity Fund Ltd, (iv) Starboard Principal
Co LP, as a member of Starboard Value GP LLC, may be deemed to have beneficial ownership and voting and dispositive control over the shares beneficially owned by Starboard Value LP and Starboard Value and Opportunity Fund Ltd, and (v) Starboard
Principal Co GP LLC, as the general partner of Starboard Principal Co LP, may be deemed to have beneficial ownership and voting and dispositive control over the shares beneficially owned by Starboard Value LP and Starboard Value and Opportunity Fund
Ltd. In addition, as the managing members of Starboard Principal Co GP LLC, each of Peter A. Feld, Mark Mitchell and Jeffrey C. Smith, may each be deemed to share beneficial ownership and voting and dispositive control of the shares beneficially
owned by Starboard Value LP.
|
(3)
|
Based on information contained in a Schedule 13G/A filed by Dimensional Fund Advisors LP with the SEC on February 11, 2011. Dimensional Fund Advisors LP disclaims
beneficial ownership of all such securities. Dimensional Fund Advisors, Inc. acts as investment advisor or manager to certain investment companies, trusts and accounts, none of which, to the knowledge of Dimensional Fund Advisors, Inc., owns more
than 5% of the class. Dimensional Fund Advisors LP has sole voting power with respect to 2,802,966 shares and sole dispositive power with respect to 2,880,970 shares. The address of Dimensional Fund Advisors, Inc. is Palisades West, Building One,
6300 Bee Cave Road, Austin, Texas, 78746.
|
(4)
|
Based on information contained in a Schedule 13D filed on June 24, 2011 with the SEC, The D3 Family Fund, L.P. owns more than 5% of the class. The D3 Family Fund, L.P.
has sole voting power with respect to 2,550,604 shares and sole dispositive power with respect to 2,550,604 shares.
|
-150-
MATERIAL TAX CONSEQUENCES
Material U.S. Federal Income Tax Consequences of the Merger
General
The following is a summary of the anticipated material U.S. federal income tax consequences of the merger and the ownership of CSR ADSs to
U.S. holders (as defined below) of Zoran common stock. This discussion is for general information only and does not purport to consider all aspects of U.S. federal income taxation that might be relevant to U.S. holders of Zoran common stock in light
of their personal investment or tax circumstances. This discussion does not apply to U.S. holders who acquired Zoran common stock pursuant to the exercise of options or warrants or otherwise as compensation, or to U.S. holders subject to special tax
rules, including, without limitation, banks, insurance companies, tax-exempt entities, financial institutions, regulated investment companies, partnerships, S-corporations, other pass-through entities, broker-dealers, persons holding Zoran common
stock as part of a hedging, conversion, or constructive sale transaction or as part of a straddle, U.S. expatriates, and persons subject to the alternative minimum tax. This discussion does not discuss U.S. tax consequences to any person
that is a non-U.S. holder (as defined below) or to any U.S. holder having a functional currency other than the U.S. dollar. In addition, it does not discuss the tax consequences of transactions effectuated prior or subsequent to, or concurrently
with, the merger, whether or not in connection with the merger. Furthermore, this discussion does not discuss U.S. federal estate or gift tax laws or tax consequences under the laws of any state, local or foreign jurisdiction.
Please consult your own tax advisor as to the specific tax consequences of the merger and the ownership of CSR ADSs, including the
applicable U.S. federal, state, local and foreign tax consequences to you of the merger and the ownership of CSR ADSs.
As
used in this discussion, a U.S. holder means a holder of Zoran common stock or CSR ADSs who holds such stock and ADSs as capital assets within the meaning of the U.S. Internal Revenue Code of 1986, as amended, or the Code, and is for
U.S. federal income tax purposes (i) a citizen or resident of the United States, (ii) a corporation or other entity taxable as a corporation organized under the laws of the United States, any State thereof or the District of Columbia,
(iii) a trust if a court within the United States is able to exercise primary jurisdiction over its administration and one or more U.S. persons have authority to control all substantial decisions of the trust, or (iv) any person that is
subject to U.S. federal income tax on its worldwide income. As used herein, a non-U.S. holder refers to any holder of Zoran common stock or CSR ADSs (other than a partnership) who is not a U.S. holder.
The discussion set forth herein is based on the Code, applicable Department of Treasury regulations, judicial authority, and
administrative rulings, all as of the date of this proxy statement/prospectus, and all of which are subject to change, possibly with retroactive effect. Neither this discussion nor the discussion under the heading Material U.S. Federal Income
Tax Consequences of Owning CSR ADSs are binding on the IRS, or the courts. In addition, neither CSR nor Zoran intends to request a ruling from the IRS with respect to the merger. Future legislative, judicial, or administrative changes or
interpretations, which may or may not be retroactive, or the failure of any factual representations to be true, correct and complete in all material respects, or the breach of any of the covenants, may adversely affect the accuracy of the statements
and conclusions described in this proxy statement/prospectus.
Material U.S. Federal Income Tax Consequences of the Merger
It is expected that the merger will be a fully taxable transaction for U.S. federal income tax purposes. As a result, a
U.S. holder of Zoran common stock generally will recognize taxable gain or loss in the merger equal to the difference between (a) the amount of cash plus the fair market value (determined at the effective time of the merger) of the CSR ADSs received
by such holder in the merger and (b) such holders adjusted tax basis in the Zoran common stock surrendered in the merger. Such gain or loss generally will be capital gain or loss and
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generally will be long-term capital gain or loss if such U.S. holders holding period for such U.S. holders Zoran common stock is greater than one year. Long-term capital gain of
non-corporate stockholders is subject to reduced rates of taxation. The deductibility of capital losses is subject to limitations.
Backup Withholding
Non-corporate Zoran stockholders may be subject to
backup withholding on any consideration received in the merger. Backup withholding will not apply, however, to a stockholder who:
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furnishes a correct taxpayer identification number and certifies, under penalties of perjury, that such holder is not subject to backup withholding on
a Form W-9, and otherwise complies with applicable requirements of the backup withholding rules;
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is a corporation or otherwise exempt from backup withholding and, when required, demonstrates this fact; or
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provides a certification of foreign status on Form W-8BEN or other applicable form.
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A stockholder who fails to provide the correct taxpayer identification number on Form W-9 may be subject to penalties imposed by the
IRS. CSR will provide a Form W-9 to you after the merger. Any amount withheld under these rules will be credited against the shareholders U.S. federal income tax liability.
Foreign Tax Credit
As discussed below (see section entitled Material Tax ConsequencesMaterial Israeli Tax Consequences of the Merger), U.S. holders of Zoran common stock may be subject to Israeli
withholding tax as a consequence of the merger. U.S. holders of Zoran common stock may be entitled to a deduction or foreign tax credit for such withholding tax in computing such U.S. holders U.S. federal income tax liability, subject to
applicable conditions and limitations, including in the case of the foreign tax credit that such U.S. holder has sufficient foreign source taxable income in order to claim the full amount of the credit. Gain, if any, from the sale of Zoran stock in
the merger generally would be treated as U.S. source gain for foreign tax credit purposes. Unused foreign tax credits may be carried back one year and forward ten years. The foreign tax credit rules are complex, and U.S. holders of Zoran common
stock should consult their own tax advisors regarding the deduction or credit for any such Israeli withholding tax.
Material Israeli Tax Consequences of the Merger
Following is a discussion of tax consequences of the merger under
Israeli tax laws to holders of Zoran common stock. Zoran has requested tax rulings from the Israeli Tax Authority that would, among other things, exempt Zoran stockholders who meet certain conditions from the application of Israeli tax withholding
to payments of consideration in the merger to them. Discussions between Zoran and the Israeli Tax Authority regarding the scope of the rulings are ongoing. If and when the tax rulings are finalized, Zoran will issue a press release and file a Form
8-K or other document with the SEC describing the scope of the exemptions provided by the rulings and detailing which Zoran stockholders are not covered by the exemptions and should instead seek to obtain an individual exemption. Zoran intends to
make available an advisor who will explain the process and information required to seek such an exemption.
Israeli Capital
Gains Tax
As a consequence of the merger, holders of Zoran common stock will be treated under Israeli tax laws as having
sold their Zoran common stock in the merger. Because of Zorans operations in Israel, the Israeli Tax Authority will view the consideration received by holders of Zoran common stock as subject to Israeli taxation. When an Israeli company is
sold, regardless of whether the consideration in the sale is cash or stock, its stockholders may be subject to Israeli taxation at the rate of 20% for individuals and 24% for corporations. The capital gains generated from the sale of Zoran common
stock by a non-Israeli resident stockholder may be exempt from Israeli capital gains tax under the provisions of applicable tax treaties. For example, under the Convention between the Government of the State of Israel and the Government of United
States of America with Respect to Taxes on Income (the U.S.-Israel Tax Treaty), Israeli capital gains tax will not apply to the
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disposition of securities by a resident of the United States (as defined below) who holds the securities as a capital asset (a U.S. Treaty Resident). However, such
exemption will not apply if (i) the capital gains from such disposition may be attributed to a permanent establishment of such U.S. Treaty Resident in Israel, or (ii) the U.S. Treaty Resident, if an individual, is physically present in Israel for
183 days or more during the tax year during which the disposition takes place. Notwithstanding the above, if the Israeli Tax Authority deems Zoran to be an Israeli resident entity for the purpose of the U.S.-Israel Tax Treaty, the exemption under
the U.S.-Israel Tax Treaty will not be applicable to any U.S. Treaty Resident who holds, or has held, directly or indirectly, during any part of the 12-month period preceding the effective time of the merger, Zoran securities representing 10% or
more of the voting power of Zoran. Pursuant to the U.S.-Israel Tax Treaty the term resident of the United States means: (i) a United States corporation; and (ii) any other person (except a corporation or any entity treated as a
corporation for United States tax purposes) resident in the United States for purposes of United States tax, but in the case of a partnership, estate, or trust only to the extent that the income derived by such partnership, estate, or trust is
subject to United States tax as the income of a resident either in the hands of the respective entity or of its partners or beneficiaries. For purposes of the preceding sentence, a United States citizen or an alien admitted to the United States for
permanent residence (a green card holder) who is not a resident of Israel (as defined in the U.S.-Israel Tax Treaty), is a resident of the United States only if the individual has a substantial presence, permanent home or habitual abode
in the United States. If such individual is a resident of Israel, he or she shall be considered a resident of both Israel and the United States and his or her residence for purposes of the U.S.-Israel Tax Treaty shall be determined under the
tie-breaker rules listed in the U.S.-Israel Tax Treaty.
Other countries, including Canada, France, Germany, Japan and the
United Kingdom, are party to tax treaties with Israel that, subject to the provisions of those treaties, may exempt a non-Israeli resident stockholder from Israeli tax.
You are urged to consult with your own tax advisor regarding the
applicability of these tax treaties to you and your receipt of merger consideration.
Furthermore, pursuant to Israeli tax
laws, non-Israeli residents will be exempt from Israeli capital gains tax on the sale of Zoran common stock pursuant to the merger, provided that each of the following conditions are satisfied: (i) the gain from the sale pursuant to the merger is
not attributed to a permanent establishment of the Zoran stockholder in Israel; (ii) the Zoran stockholder was a resident of a contracting state (i.e., a country with which the State of Israel has a double taxation treaty, such as the
U.S.) during a consecutive ten-year period prior to the stockholders purchase of Zoran common stock; (iii) the stockholder purchased the Zoran common stock between July 1, 2005, and December 31, 2008; (iv) a report on the initial purchase of
Zoran common stock by the Zoran stockholder was submitted to the Israeli Tax Authority within thirty days of the date of purchase; (v) the stockholder reports the sale of Zoran common stock in the merger to the tax authorities in the
stockholders country of residence, and (vi) the stockholder did not purchase the Zoran common stock from a related party of such stockholder or as part of a tax-free reorganization. For the purpose of clause (ii) above, if the Zoran
stockholder is a corporate entity, in addition to being a resident of a contracting state for the consecutive ten-year period prior to the purchase of Zoran common stock, 75% of the corporate entitys means of control, including voting rights,
needs to be held, directly or indirectly, by individuals who are resident of a contracting state during such ten-year period. Furthermore, since partnerships are treated as pass-through entities under Israeli tax law, the foregoing conditions will
be examined separately for each partner of a partnership selling Zoran common stock in the merger. In the past, the Israeli Tax Authority has agreed to issue exemptions to stockholders who have failed to satisfy the notice condition described in
clause (iv) above, but who have satisfied each of the other conditions described above.
In addition, pursuant to Israeli tax
law, non-Israeli residents will be exempt from Israeli capital gains tax on the sale of Zoran common stock purchased on or after January 1, 2009, provided that each of the following conditions are satisfied: (i) the gain from the sale is not
attributed to a permanent establishment of the Zoran stockholder in Israel, and (ii) the stockholder did not purchase the Zoran common stock from a related party of such stockholder nor as part of a tax-free reorganization.
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Non-Israeli residents who do not satisfy the conditions under Israeli tax law listed above,
including those stockholders who purchased Zoran common stock before July 1, 2005, may be exempt under the provisions of applicable tax treaties as described above.
You are urged to consult with your own tax advisor for a full understanding of the Israeli tax consequences of the merger to you, including the consequences under any applicable, state, local, foreign
or other tax laws or tax treaties. If you believe if you are entitled to an exemption from Israeli taxation, you may apply to the Israeli Tax Authority to obtain a certificate of exemption and should submit it to the exchange agent at least three
business days prior to the date of the applicable payment of the merger consideration to you.
Israeli Tax Withholding
Whether or not a particular stockholder is actually subject to Israeli capital gains tax in connection with the merger,
absent receipt by Zoran of a tax ruling from the Israeli Tax Authority prior to closing of the merger, all Zoran stockholders will be subject to Israeli tax withholding at the rate of 20% (for individuals) and 24% (for corporations) on the gross
consideration received in the merger (unless the stockholder requests and obtains an individual certificate of exemption from the Israeli Tax Authority, as described below), and CSR or the exchange agent will withhold and deduct from the cash
consideration which each Zoran stockholder is entitled to receive pursuant to the merger agreement an amount equal to 20% or 24%, as applicable, of the gross consideration (cash and ADSs) received in the merger by such stockholder.
Zoran has filed a request for tax rulings from the Israeli Tax Authority with respect to (i) the application of Israeli tax withholding
to payments of consideration in the merger to Zoran stockholders and (ii) the application of Israeli tax withholding and other Israeli tax treatment applicable in respect of the merger to holders of Zoran stock options, RSUs and Zoran common stock
issued to certain employees. Zoran is currently in discussion with the Israeli Tax Authority on the scope of the final rulings and the exemption to be provided to Zoran stockholders and, as of July 28, 2011, no definitive binding ruling has been
obtained from the Israeli Tax Authority. There can be no assurance that such rulings will be granted before the closing of the merger or at all.
It is expected that in no event will any holder of Zorans common stock who (i) is an Israeli resident for purposes of the Israeli Income Tax Ordinance (New Version), 1961, as amended (the
ITO) and does not hold its Zoran common stock through an Israeli broker or Israeli financial institution, (ii) acquired its shares of Zoran common stock before Zorans initial public offering on The NASDAQ Stock Market in 1995
(with respect to such shares), or (iii) holds five percent or more of Zorans outstanding stock as of the closing date of the merger, be covered by the ruling being requested by Zoran and, absent receipt of an individual exemption from the
Israeli Tax Authority, such a holder will be subject to Israeli tax withholding at the rate of 20% (for individuals) and 24% (for corporations) on the gross consideration received in the merger, and CSR or the exchange agent will withhold and deduct
such amounts in the manner described above. Certain additional categories of non-Israeli resident stockholders are also expected to be excluded from the scope of any eventual ruling granted by the Israeli Tax Authority, and the final determination
of the type of holders of Zoran common stock who will be included in such categories will be based on the outcome of the ongoing discussions with the Israeli Tax Authority.
Exemptions from Israeli tax withholding may also be available to certain holders of Zoran common stock under relevant tax treaties with Israel or under certain provisions of Israeli tax law. Regardless of
whether Zoran obtains the requested tax rulings from the Israeli Tax Authority, any holder of Zoran common stock who believes that it is entitled to such an exemption may separately apply to the Israeli Tax Authority to obtain a certificate of
exemption from withholding or an individual tax ruling providing for no withholding or withholding at a reduced rate, and submit such certificate of exemption or ruling to the exchange agent at least three business days prior to the date of the
applicable payment of the merger consideration to such holder. If CSR or the exchange agent receive a valid exemption certificate or tax ruling (as determined in CSRs or the exchange agents discretion) at least three business days prior
to the date of the applicable payment, then the withholding (if any) of any amounts
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under the ITO, from the consideration payable shall be made only in accordance with the provisions of such Israeli tax certificate or tax ruling. The validity of such certificate of exemption or
ruling will be determined in CSRs or the exchange agents discretion. The Israeli tax withholding consequences of the merger to Zoran stockholders and holders of Zoran stock options and RSUs may vary depending upon the particular
circumstances of each stockholder or holder of Zoran stock options or RSUs, as applicable, and the final tax rulings issued by the Israeli Tax Authority. To the extent that tax is withheld on payments to U.S. taxpayers, it is possible that such
withheld taxes may not be able to be credited against such taxpayers U.S. income tax liability.
For purposes of the tax
ruling mentioned above, a five percent stockholder means a stockholder who holds or is entitled to purchase, directly or indirectly, alone or together with a relative of such stockholder, one of the following:
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at least five percent of the issued and outstanding Zoran stock;
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at least five percent of the voting rights of Zoran;
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the right to receive at least five percent of Zorans profits or its assets upon liquidation; or
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the right to appoint a manager/director.
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For Israeli tax purposes, a relative of a person is defined as the spouse, brother, sister, parents, grandparents, descendants and the descendants of the spouse of such person, and the spouse
of any of the foregoing.
The determination of whether a person is deemed a
resident of Israel
may be based
on a Declaration of Status form for Israeli Tax Purposes to be completed by each stockholder. If so required by the tax ruling, a form of such Declaration of Status shall be provided to each stockholder.
Stockholders who received or acquired their Zoran shares or were granted options or RSUs under one or more of the Zoran stock incentive
plans, or otherwise as compensation for employment or services provided to Zoran, may be subject to different tax rates.
Zoran has also filed a request for a tax ruling from the Israeli Tax Authority with respect to the tax withholding and other Israeli tax
treatment applicable in respect of the merger to holders of Zoran stock options, RSUs and common stock subject to Section 102 of the ITO.
The tax ruling requested by Zoran in respect of holders of Zoran stock options, RSUs and common stock subject to Section 102 of the ITO, if obtained, would confirm, among other things that:
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the assumption of the stock options and RSUs of Zoran will not be subject to any Israeli tax withholding at closing; and
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the statutory holding period with respect to Zoran stock options, RSUs and common stock subject to Section 102 of the ITO will continue
uninterrupted from the original date of grant and will not recommence as a result of the transactions contemplated by the merger agreement; provided that the consideration paid to the holders of such stock options, RSUs and common stock is deposited
with the trustee appointed by Zorans Israeli subsidiary, in accordance with Section 102 of the ITO, for the duration of the statutory holding period.
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If no tax ruling is obtained for holders of Zoran stock options, RSUs and common stock subject to Section 102 of the ITO, such
holders will be subject to Israeli tax withholding on the gross consideration received in the merger at the fixed rate of 25% or at such holders marginal tax rates under Israeli law for ordinary income, and will be also subject to withholding
for national insurance contributions, depending on the specific circumstances of such holders and the terms and the timing of the grants of stock options, RSUs or common stock to such holders. In such event, CSR or the exchange agent will withhold
and deduct from the number of
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CSR ADSs to which such holders stock options or RSUs are exercisable pursuant to the merger agreement, such number of CSR ADSs with a value equal to the appropriate withholding amount. For
holders of common stock, tax withholding will be made from the cash consideration on the gross consideration (cash and ADSs) received in the merger as explained above for all stockholders of Zoran.
The Israeli tax rulings mentioned above may not be obtained or may contain such provisions, terms and conditions as the Israeli Tax
Authority may prescribe, which may be different from those detailed above. If CSR or the exchange agent deducts any amount from the merger consideration payable to you in respect of Israeli withholding tax obligations, you should consult your tax
advisor concerning the possibility of obtaining a refund from the Israeli Tax Authority of any such withheld amounts.
Material U.S. Federal Income Tax Consequences of Owning CSR ADSs
The following statements are only a summary of
the anticipated material U.S. federal income tax consequences of the ownership of CSR ADSs to U.S. holders of Zoran common stock.
Passive Foreign Investment Company Rules
Special U.S. federal income tax
rules apply to U.S. holders owning stock of a passive foreign investment company, or PFIC. A foreign corporation generally will be considered a PFIC for any taxable year in which (i) 75% or more of its gross income is passive income, or
(ii) 50% or more of the average value of its assets are considered passive assets (generally, assets that generate passive income). Based upon current projections of the Combined Companys holdings of cash and liquid assets
such as bank deposits and marketable securities (all of which are passive assets for these purposes) and CSRs current share price (which affects the valuation of certain assets including goodwill), CSR believes that it did not
qualify as a PFIC for U.S. federal income tax purposes with respect to the taxable year ended December 31, 2010, and CSR does not believe that it will qualify as a PFIC for its taxable year ending December 31, 2011. However, the
determination of whether a company is a PFIC is highly factual, and will depend, among other things, upon CSRs share price and future financial performance. Accordingly, neither Wilson Sonsini Goodrich & Rosati, Professional
Corporation, counsel to CSR, nor Jones Day, counsel to Zoran, express any opinion as to CSRs status as a PFIC for U.S. federal income tax purposes. CSR will notify U.S. holders of ordinary shares if it determines that it is a PFIC for a given
taxable year.
If CSR were classified as a PFIC for any taxable year during which U.S. holders hold CSR ADSs, U.S. holders
would be subject to special, adverse rules unless, as described below, they make either a QEF election or a mark-to-market election with respect to their CSR ADSs. Absent such an election, U.S. holders gain from the
sale or other disposition of CSR ADSs and excess distributions received from CSR would be ordinary income. Such income would be taxed as if the gain or excess distribution had been realized ratably over the U.S. holders
holding period and would be increased by an interest charge with respect to underpayments of tax as if the ratable portion of the gain or excess distribution with respect to a given prior taxable year had been subject to tax in such year. An excess
distribution generally would be any distribution to a U.S. holder with respect to CSR ADSs during a single taxable year that is greater than 125% of the average annual distributions received by such U.S. holder with respect to CSR ADSs during the
three preceding taxable years or, if shorter, during his or her holding period with respect to the CSR ADSs. For these purposes, gifts, exchanges pursuant to corporate reorganizations, and pledges of CSR ADSs for use as a security for a loan may be
treated as taxable dispositions.
U.S. holders who make neither a mark-to-market election nor a QEF election will be required
to file an IRS Form 8621 if they own CSR ADSs in any year in which CSR is a PFIC and they receive a distribution from CSR or dispose of their CSR ADSs (and will also be required to file this form to make certain elections with respect to their
CSR ADSs).
Mark-to-Market Election
. If CSR ADSs are considered to be traded on a qualified exchange or other
market, U.S. holders would not be subject to the foregoing PFIC taxation rules if they make a mark-to-market election with respect to their CSR ADSs. Although the determination of whether shares are traded on a qualified
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exchange or other market is factual and there is no specific authority that designates certain non-U.S. exchanges as qualified exchanges, CSR expects that U.S. holders of CSR
ADSs will be able to make this election. However, no assurance can be provided in this regard. After making such an election, U.S. holders generally would include as ordinary income in each year during which the election is in effect and during
which CSR is a PFIC the excess, if any, of the fair market value of CSR ADSs at the end of the taxable year over their adjusted basis in such CSR ADSs. U.S. holders also would be allowed to take an ordinary loss in respect of the excess, if any, of
their adjusted basis in CSR ADSs over their fair market value at the end of the taxable year (but only to the extent of the net amount of income that was previously included as a result of the mark-to-market election). U.S. holders tax basis
in CSR ADSs would be adjusted to reflect any income or loss amounts resulting from a mark-to-market election. If made, a mark-to-market election would be effective for the taxable year for which the election was made and for all subsequent taxable
years in which CSR is a PFIC unless the CSR ADSs were not considered to be traded on a qualified exchange or other market or the IRS consented to the revocation of the election. For any year for which CSR is not a PFIC, the
mark-to-market election is inoperative. U.S. holders make the mark-to-market election on IRS Form 8621, which must be filed along with their tax return for the taxable year for which the election is to take effect on or before the due date for
such return (including extensions). U.S. holders who decide to make the mark-to-market election are advised to make the election for the first taxable year for which CSR is a PFIC. U.S. holders must report income and loss with respect to the
election for each year for which CSR is a PFIC on IRS Form 8621.
QEF Election
. The PFIC taxation rules outlined
above also would not apply to U.S. holders that elect to treat CSR as a qualified electing fund or QEF. U.S. holders that are eligible for and timely make a QEF election, would include in income each year for which CSR is a
PFIC (and would be subject to current U.S. federal income tax on) their pro rata share of CSRs ordinary earnings, as ordinary income, and net capital gains, as long-term capital gain, for the taxable year that ends with or within their taxable
year, regardless of whether such amounts are actually distributed. Any such ordinary income would not be eligible for the favorable rates applicable to qualified dividend income. Corporate U.S. holders would not be eligible for a dividends received
deduction in respect of such income or gain. U.S. holders adjusted tax basis in CSR ADSs would be increased to reflect taxed but undistributed earnings and profits. Distributions of earnings and profits that had been previously taxed would
result in a corresponding reduction in U.S. holders adjusted tax basis in CSR ADSs and would not be taxed again. U.S. holders would not, however, be entitled to a deduction for their pro rata share of any losses that CSR incurred with respect
to any year.
U.S. holders may only make a QEF election if CSR provides them with the information needed to determine
CSRs ordinary earnings and net capital gains. If it is a PFIC, CSR will provide U.S. holders with the information that is necessary in order to make a QEF election and to report their shares of ordinary earnings and net capital gains for each
year for which CSR is a PFIC. CSR has had substantial taxable income in prior years, and may have taxable income in 2011 or any future year in which it may be a PFIC. As CSR historically has not made cash distributions with respect to its ordinary
shares, U.S. holders may be taxed on significant phantom income if they make a QEF election (although this could be subject to change depending on whether CSR makes future distributions with respect to its ordinary shares). A U.S. holder
may make a separate election to defer the payment of taxes on undistributed income inclusions under the QEF rules, but any taxes deferred would be subject to an interest change. For any year for which CSR is not a PFIC, the QEF election would be
inoperative. If U.S. holders make a QEF election, they would generally recognize capital gain or loss on the sale, exchange or other disposition of CSR ADSs. The QEF election is made by each U.S. holder, and can only be revoked with the consent of
the IRS. U.S. holders make the QEF election on IRS Form 8621, which must be filed along with their tax return for the first taxable year to which the election will apply on or before the due date for such return (including extensions). U.S.
holders who decide to make the QEF election are advised to make the election for the first taxable year for which CSR is a PFIC. A U.S. holder also must file Form 8621 with the IRS for each subsequent year that the election is in effect.
U.S. holders cannot make both a mark-to-market election and a QEF election.
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U.S. holders are urged to consult their own tax advisors concerning the potential
application of the PFIC rules to their ownership and disposition of CSR ADSs, including the availability and advisability of making a mark-to-market or QEF election.
Taxation of Dividends
Subject to the passive foreign investment company
rules described above, for U.S. federal income tax purposes, a U.S. holder will generally include in gross income the amount of any dividend paid by CSR to the extent paid out of CSRs current or accumulated earnings and profits, as determined
for U.S. federal income tax purposes, as ordinary income when the dividend is actually or constructively received by the U.S. holder. Individual U.S. holders currently are taxed at a maximum rate of 15% on dividends received from qualified
foreign corporations, provided the U.S. holders satisfy certain holding period and other requirements. In order to be treated as a qualified foreign corporation, CSR must be eligible for benefits of the United States income tax
treaty with the United Kingdom. Although CSR believes that it is currently eligible for such treaty benefits, there can be no assurance that this will be the case for any taxable year. Further, individual U.S. holders will not be eligible for the
reduced rates of dividend taxation if CSR is a PFIC for the taxable year of the dividend payment or the preceding taxable year. Corporate U.S. holders will be taxed on dividends received from CSR at a 35% tax rate. Dividends generally will be income
from sources outside of the United States for foreign tax credit limitation purposes, and generally will not be eligible for the dividends-received deduction that is allowed to U.S. corporations in respect of dividends received from other U.S.
corporations. Distributions in excess of CSRs current or accumulated earnings and profits, as determined for U.S. federal income tax purposes, will be treated as a non-taxable return of capital to the extent of the U.S. holders tax basis
in the CSR ADSs and thereafter as capital gain.
The amount of the dividend includible in the income of a U.S. holder will be
the U.S. dollar value of the dividend determined at the spot rate on the date that dividend is includible in the income of the U.S. holder, regardless of whether the payment is in fact converted into U.S. dollars at such time. A U.S. holder will
have a basis in any GBP distributed by CSR equal to the U.S. dollar value of the GBP on the date it is actually or constructively received by the U.S. holder. Generally, any gain or loss resulting from currency exchange fluctuations during the
period from the date the dividend payment is includible in income to the date that payment is converted into U.S. dollars will be treated as ordinary income or loss.
Taxation of Capital Gains
Subject to the PFIC rules described above, upon
a sale or other disposition of CSR ADSs, a U.S. holder will generally recognize gain or loss for U.S. federal income tax purposes in an amount equal to the difference between the U.S. dollar value of the amount realized and the U.S. holders
tax basis, determined in U.S. dollars, in the CSR ADSs. Gain or loss recognized will be long-term capital gain or loss with respect to CSR ADSs held for more than 12 months at the time of the sale or other disposition and any gain recognized
generally will be income from sources within the United States for foreign tax credit limitation purposes.
Backup
Withholding and Information Reporting
In general, dividend payments with respect to CSR ADSs and proceeds from the sale or
other disposition of CSR ADSs made (or deemed made) within the United States may be subject to information reporting to the IRS and U.S. backup withholding (currently at a rate of 28%). Backup withholding will generally not apply to a holder who:
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furnishes a correct taxpayer identification number and certifies, under penalties of perjury, that such holder is not subject to backup withholding on
a Form W-9, and otherwise complies with applicable requirements of the backup withholding rules;
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is a corporation or otherwise exempt from backup withholding and, when required, demonstrates this fact; or
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provides a certification of foreign status on Form W-8BEN or a successor form.
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Backup withholding is not an additional tax. Amounts withheld under the backup withholding
rules will be allowed as a refund or credit against a holders U.S. federal income tax liability, provided the holder furnished the required information to the IRS.
Material U.K. Tax Consequences of Owning CSR ADSs
The following paragraphs summarize the material U.K. tax consequences for investors who are not resident or, in the case of individuals, not ordinarily resident in the U.K. for U.K. tax purposes
(including U.S. investors who are not resident or, in the case of individuals, not ordinarily resident in the U.K. for U.K. tax purposes) regarding ownership and disposal of CSR ADSs.
The following statements do not constitute tax advice and are intended only as a general guide to current U.K. law and HM
Revenue & Customs published practice (which are both subject to change at any time and possibly with retrospective effect). They relate only to certain limited aspects of the U.K. taxation of holders of CSR ADSs and are intended to apply
only to persons who are not resident or, in the case of individuals, not ordinarily resident in the U.K. for U.K. tax purposes, who hold their CSR ADSs as investments and who for U.K. tax purposes are the absolute beneficial owners of their CSR
ADSs. They may not apply to certain holders of CSR ADSs, such as dealers in securities, insurance companies and collective investment schemes, holders of CSR ADSs who are exempt from U.K. taxation and holders of CSR ADSs who have (or are deemed to
have) acquired their CSR ADSs by virtue of an office or employment. Such persons may be subject to special rules. Any person who is in any doubt as to his or her U.K. tax position, or who is subject to taxation in any jurisdiction other than the
U.K., should consult his or her professional advisor without delay.
The following statements assume that beneficial ownership
of a CSR ADS represents beneficial ownership of the underlying CSR ordinary shares.
Taxation of Distributions
Under current U.K. tax law, CSR will not be required to withhold tax at source from dividend payments it makes.
A holder of CSR ADSs who is not resident or, in the case of an individual, ordinarily resident in the U.K. for U.K. tax
purposes should not, in general, be subject to U.K. income tax or U.K. corporation tax on dividends from CSR, as long as the relevant holder of CSR ADSs does not carry on a trade, profession or vocation in the U.K. through a branch, agency or, in
the case of a corporate holder of CSR ADSs, permanent establishment in connection with which its CSR ADSs are held. Holders of CSR ADSs who are resident or, in the case of individuals, ordinarily resident in the U.K. or holders of CSR ADSs whose CSR
ADSs are held in connection with a branch, agency or, in the case of a corporate holder of CSR ADSs, permanent establishment through which that holder of CSR ADSs carries on a trade, profession or vocation in the U.K. are encouraged to consult
appropriate professional advisors.
Taxation of chargeable gains
Subject to the provisions summarized below in relation to temporary non-residents, holders of CSR ADSs who are not resident or, in the
case of individuals, ordinarily resident in the U.K. for U.K. tax purposes and who are not carrying on a trade, profession or vocation in the U.K. through a branch or agency or, in the case of a corporate holder of CSR ADSs, permanent establishment
in connection with which their CSR ADSs are held will not generally be subject to U.K. tax on chargeable gains as a consequence of the disposal of their CSR ADSs.
However, a non-U.K. resident individual holder of CSR ADSs may be liable to U.K. tax on chargeable gains if, at the time of a disposal of those CSR ADSs, that holder of CSR ADSs carries on a trade,
profession or vocation in the U.K. through a branch or agency and, at or before the time when any capital gain accrues, the CSR ADSs have been used in or for the purposes of that trade, profession or vocation or have been used, held or acquired for
the purposes of that branch or agency.
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In addition, a holder of CSR ADSs who is an individual and who is only temporarily resident
outside the U.K. for the purposes of U.K. tax on chargeable gains at the date of a disposal of all or part of his or her CSR ADSs may, on becoming resident or ordinarily resident for U.K. tax purposes in the U.K. again, be liable to U.K. tax on
chargeable gains in respect of disposals made while he or she was temporarily resident outside the U.K..
A non-U.K. resident
corporate holder of CSR ADSs may be liable to U.K. tax on chargeable gains if, at the time of a disposal of those CSR ADSs, that corporate holder of CSR ADSs carries on a trade in the U.K. through a permanent establishment and, at or before the time
when any capital gain accrues, the CSR ADSs have been used in or for the purposes of that trade or have been used, held or acquired for the purposes of that permanent establishment.
Non-U.K. resident holders of CSR ADSs may be subject to foreign taxation on any gain, subject to the terms of an applicable double
taxation treaty.
U.K. stamp duty and U.K. stamp duty reserve tax
The issue of the CSR ordinary shares to, or to a nominee or agent for, the depositary, as a person whose business is or includes the issue
of depositary receipts, referred to herein as a Depositary Receipt System, may give rise to U.K. stamp duty reserve tax at the rate of 1.5% of the consideration paid. This U.K. stamp duty reserve tax will be borne by CSR.
Following a recent decision of the European Court of Justice, HM Revenue & Customs have announced that they will not seek to
apply the 1.5% U.K. stamp duty reserve tax charge where new shares are first issued into an EU Depositary Receipt System. In light of that announcement, it would seem that, in the view of HM Revenue & Customs, the 1.5% U.K. stamp duty reserve
tax charge will continue to apply to the issue of new shares to non-EU Depositary Receipt Systems. However, a charge to U.K. stamp duty reserve tax at 1.5% on the issue of new shares to a non-EU Depositary Receipt System is arguably not consistent
with the aforementioned decision of the European Court of Justice and the lawfulness of the charge is currently subject to challenge before the U.K. courts.
No U.K. stamp duty reserve tax will be payable in respect of a subsequent transfer of CSR ADSs and, in practice, no U.K. stamp duty should need to be paid in respect of any such transfer.
In the event that a holder of CSR ADSs exchanges his or her CSR ADSs for the underlying CSR ordinary shares, no U.K. stamp duty or U.K.
stamp duty reserve tax should arise. However, subject to an exemption for certain low value transactions, any subsequent transfer on sale of CSR ordinary shares in certificated form will generally give rise to a liability, usually met by the
purchaser, to
ad valorem
U.K. stamp duty at the rate of 0.5% (rounded up to the nearest multiple of £5) of the amount or value of the consideration paid. An agreement to transfer such CSR ordinary shares which is or becomes
unconditional will generally give rise to U.K. stamp duty reserve tax at the rate of 0.5% of the amount or value of the consideration paid, such U.K. stamp duty reserve tax generally being payable by the transferee or purchaser. The liability to
U.K. stamp duty reserve tax will generally be cancelled, or any U.K. stamp duty reserve tax paid will generally be refunded, if the agreement is completed by a duly stamped transfer within six years of either the date of the agreement or, if the
agreement was conditional, the date when the agreement became unconditional. A subsequent transfer of CSR ordinary shares on a paperless basis through CREST will generally be subject to U.K. stamp duty reserve tax at the rate of 0.5% of the amount
or value of the consideration paid, which will be collected and accounted for to HM Revenue & Customs by CREST (such U.K. stamp duty reserve tax generally being borne by the transferee or purchaser).
The above statements are intended only as a general guide to the current U.K. stamp duty and U.K. stamp duty reserve tax position.
Transfers to certain categories of person are not liable to U.K. stamp duty or U.K. stamp duty reserve tax and others may be liable at a higher rate.
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DESCRIPTION OF CSR ORDINARY SHARES
General Description of CSR Ordinary Shares
CSR ordinary shares that are currently outstanding and CSR ordinary shares underlying the CSR ADSs to be issued in connection with the merger will comprise a single class of ordinary shares with a nominal
value of 0.1 pence each.
The following information is a summary of CSR ordinary shares:
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CSR ordinary shares carry the right to receive dividends and distributions paid by CSR, if any.
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The holders of CSR ordinary shares have the right to receive notice of, and to attend and vote at, all general meetings of CSR.
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Except in relation to dividends that have been declared and rights on a liquidation of CSR, CSR shareholders have no rights to share in the profits of
CSR.
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Subject to the Companies Acts, any equity securities issued by CSR for cash must first be offered to CSR shareholders in proportion to their existing
holdings of CSR ordinary shares.
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The Companies Acts and the listing rules made by the U.K. Listing Authority allow for the disapplication of pre-emption rights, which may be waived by
a special resolution of CSR shareholders, either generally or specifically, for a maximum period not exceeding five years.
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CSR ordinary shares are not redeemable; however, CSR may purchase or contract to purchase any of its ordinary shares on or off-market, subject to the
Companies Acts and the listing rules. CSR may only purchase its ordinary shares out of distributable reserves or the proceeds of a new issue of shares made for the purpose of funding the repurchase.
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If CSR is wound up (whether the liquidation is voluntary, under supervision of the Court or by the Court), the liquidator is under a duty to collect in
and realize the assets of CSR and to distribute them to CSRs creditors and, if there is a surplus, to CSR shareholders according to their entitlements. This applies whether the assets consist of property of one kind or of different kinds.
Articles of Association of CSR
The following information is a summary of the material terms of CSR ordinary shares as specified in CSRs articles of association as presently in effect. The following summary does not purport to be
complete and is qualified in its entirety by reference to CSRs memorandum of association and CSRs articles of association.
Share Rights
Subject to the Companies Acts, any resolution passed by CSR
under the Companies Acts and other shareholders rights, ordinary shares may be issued with such rights and restrictions as CSR may by ordinary resolution decide, or (if there is no such resolution or so far as it does not make specific
provision) as CSRs board of directors may decide.
Redeemable shares may be issued. Unissued shares are at the disposal
of CSRs board of directors.
Voting Rights
Subject to any rights or restrictions attaching to any class of shares, every member and every duly appointed proxy present at a general
meeting or class meeting has, upon a show of hands, one vote and every member present in person or by proxy has, upon a poll, one vote for every share held by him.
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In the case of joint holders of a share, the vote of the senior joint holder who tenders a
vote, whether in person or by proxy, must be accepted to the exclusion of the votes of the other joint holders and, for this purpose, seniority is determined by the order in which the names stand in the register in respect of the joint holding.
Restrictions
No member shall, unless the CSR board of directors decides otherwise, be entitled to vote at any general meeting or class meeting in respect of any share held by him if any call or other sum then payable
by him in respect of that share remains unpaid or if a person with a 0.25 per cent interest (as defined in the Articles) has been served with a restriction notice (as defined in the Articles) after failure to provide CSR with information
concerning interests in those shares required to be provided under the Companies Acts.
Variation of Rights
The rights attached to any class of shares may be varied with the written consent of the holders of not less than three-fourths in nominal
value of the issued shares of that class (calculated excluding any shares held as treasury shares), or with the sanction of a special resolution passed at a separate general meeting of the holders of those shares. At every such separate general
meeting (except an adjourned meeting) the quorum must be two or more persons holding or representing by proxy not less than one-third in nominal value of the issued shares of the class (calculated excluding any shares held as treasury shares).
The rights conferred upon the holders of any shares are not, unless otherwise expressly provided in the rights attaching to
those shares, deemed to be varied by the creation or issue of further shares ranking equally with them.
Transfer of Shares
The ordinary shares are in registered form. Any ordinary shares may be held in uncertificated form and, subject to the
articles, title to uncertificated shares may be transferred by means of a relevant system. Provisions of the articles of association do not apply to any uncertificated shares to the extent that such provisions are inconsistent with the holding of
shares in uncertificated form or with the transfer of shares by means of a relevant system.
Subject to the articles of
association, any member may transfer all or any of his certificated shares by an instrument of transfer in any usual form or in any other form which the CSR board of directors may approve. The instrument of transfer must be signed by or on behalf of
the transferor and (in the case of a partly paid share) the transferee.
The transferor of an ordinary share is deemed to
remain the holder until the transferees name is entered in the register.
CSRs board of directors can decline to
register any transfer of any share which is not a fully paid share. CSRs board of directors may also decline to register a transfer of a certificated share unless the instrument of transfer:
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is duly stamped or certified or otherwise shown to the satisfaction of the CSR board of directors to be exempt from stamp duty and is accompanied by
the relevant share certificate and such other evidence of the right to transfer as the CSR board of directors may reasonably require;
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is in respect of only one class of share; and
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if to joint transferees, is in favor of not more than four such transferees.
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The registration of a transfer of an uncertificated share may be refused in the circumstances set out in the uncertificated securities
rules (as defined in the articles of association) and where, in the case of a transfer to joint holders, the number of joint holders to whom the uncertificated share is to be transferred exceeds four.
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CSRs board of directors may decline to register a transfer of any of CSRs
certificated shares by a person with a 0.25% interest (as defined in the articles of association) if such a person has been served with a restriction notice after failure to provide CSR with information concerning interests in those shares required
to be provided under the Companies Acts, unless the transfer is shown to the CSR board of directors to be pursuant to an arms length sale.
Alteration of Share Capital
CSR may by ordinary resolution increase,
consolidate, or consolidate and then subdivide its shares or any of them. Subject to the Companies Acts, CSR, by resolution, may determine that, as between shares resulting from a subdivision, any of them may have a preference or advantage, or may
be subject to restrictions as compared with the others. CSR may, by special resolution, reduce its share capital, share premium account, capital redemption reserve or any other undistributable reserve.
Shareholder Meetings
The Articles rely on the U.K. Companies Act 2006 provisions dealing with the calling of general meetings. The Companies Act 2006 provides that a general meeting (other than an adjourned meeting) must be
called by notice of at least 21 days in the case of an annual general meeting (unless shareholders approve a notice period of 14 days by special resolution) and at least 14 days in any other case. Notice of a general meeting must be given in hard
copy form, in electronic form, or by means of a website and must be sent to every member and every director. It must state the time and date and the place of the meeting and the general nature of the business to be dealt with at the meeting. A
notice calling an annual general meeting must state that the meeting is an annual general meeting.
Each director shall be
entitled to attend and speak at any general meeting. The chairman of the meeting may invite any person to attend and speak at any general meeting where he considers that this will assist in the deliberations of the meeting.
Dividends
CSR may by ordinary resolution from time to time declare dividends not exceeding the amount recommended by CSRs board of directors.
CSRs board of directors may pay interim dividends, and also any fixed rate dividend, whenever the financial position of CSR, in the opinion of the CSR board of directors, justifies its payment. If CSRs board of directors acts in good
faith, it is not liable to holders of shares with preferred or similar rights for losses arising from the payment of interim or fixed dividends on other shares.
The CSR board of directors may withhold payment of all or any part of any dividends or other monies payable in respect of CSRs shares from a person with a 0.25% interest if such a person has been
served with a restriction notice after failure to provide CSR with information concerning interests in those shares required to be provided under the Companies Acts.
Except insofar as the rights attaching to, or the terms of issue of, any share otherwise provide, all dividends must be apportioned and paid pro rata according to the amounts paid up on the share during
any portion of the period in respect of which the dividend is paid. Except as set out above, dividends may be declared or paid in any currency.
The CSR board of directors may, if authorized by an ordinary resolution, offer ordinary shareholders (excluding any member holding shares as treasury shares) in respect of any dividend the right to elect
to receive ordinary shares by way of scrip dividend instead of cash.
Any dividend unclaimed after a period of 12 years from
the date when it was declared or became due for payment must be forfeited and revert to CSR.
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CSR may stop sending checks, warrants or similar financial instruments in payment of
dividends by post in respect of any shares or may cease to employ any other means of payment, including payment by means of a relevant system, for dividends if either (i) at least two consecutive payments have remained uncashed or are returned
undelivered or that means of payment has failed or (ii) one payment remains uncashed or is returned undelivered or that means of payment has failed and reasonable inquiries have failed to establish any new postal address or account of the
holder. In addition, CSR must resume sending dividend checks, warrants or similar financial instruments or employing that means of payment if the holder requests such resumption in writing.
For information regarding the taxation of dividends under U.S. and U.K. tax laws, see the section entitled Material Tax
Consequences.
Legislation Under Which CSR Ordinary Shares Have Been Created
CSR ordinary shares underlying the CSR ADSs to be issued in connection with the merger will be created under the Companies Act 2006.
Applications for Admission of CSR Ordinary Shares
Applications have been made to the U.K. Listing Authority and to the London Stock Exchange for the ordinary shares underlying the CSR ADSs to be issued in connection with the merger to be admitted to the
premium segment of the Official List; and to trading on the London Stock Exchanges main market for listed securities. Subject to the satisfaction of the conditions of the merger, CSR expects that admission will become effective and dealings in
the ordinary shares underlying the CSR ADSs to be issued in connection with the merger will commence on the London Stock Exchange at 8:00 a.m., local time, on the effective date of the merger.
Form and Currency of the Ordinary Shares
The ordinary shares underlying the CSR ADSs to be issued in connection with the merger will (when issued) be in registered form and will be capable of being held in certificated and uncertificated form.
The Registrar of CSR is Equiniti Limited, Aspect House, Spencer Road, Lancing, West Sussex BN99 6ZL, United Kingdom.
Title to the certificated ordinary shares will be evidenced by entry in the register of members of CSR and title to uncertificated
ordinary shares will be evidenced by entry in the operator register maintained by CREST (which forms part of the register of members of CSR). CREST is an electronic settlement system in the U.K. which enables CSR ordinary shares to be evidenced
otherwise than by a physical certificate and transferred electronically rather than by delivery of a physical certificate. Under English law, persons who are neither residents nor nationals of the United Kingdom may freely hold, vote and transfer
CSR ordinary shares in the same manner and subject to the same terms as United Kingdom residents or nationals.
Certificates
already in issue for the ordinary shares currently outstanding will remain valid following completion of the merger.
The CSR
ordinary shares underlying the CSR ADSs to be issued in connection with the merger will be denominated in pounds sterling.
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Shareholder authorities passed at the CSR annual general meeting held on May 18, 2011
At CSRs annual general meeting held on May 18, 2011, CSR shareholders passed the following resolutions relating
to CSRs share capital:
Ordinary Resolutions
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authorizing CSRs board of directors to allot, until the end of next years annual general meeting (or, if earlier, until the close of
business on August 18, 2012), ordinary shares up to an aggregate nominal amount equal to £58,660 (representing 58,660,000 ordinary shares of 0.1 pence each) and, subject to certain conditions, up to an aggregate nominal amount equal to
£117,320 (representing 117,320,000 ordinary shares of 0.1 pence each) by way of a rights issue.
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Special Resolutions
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conditional upon the resolutions with respect to the allotments above, giving CSRs board of directors the power until the end of next years
annual general meeting (or, if earlier, until the close of business on August 18, 2012) to allot ordinary shares up to an aggregate nominal amount of £8,790 (representing 8,790,000 ordinary shares of 0.1 pence each) for cash as if pre-emption
rights in respect of such shares do not apply; and
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authorizing CSR, until the conclusion of next years annual general meeting (or, if earlier, at the close of business on August 18, 2012), to
purchase its own fully paid ordinary shares (up to a maximum of 17,599,800 ordinary shares) by way of one or more market purchases under certain conditions.
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Shareholder authorities proposed at the CSR extraordinary general meeting scheduled for August 25, 2011
At CSRs extraordinary general meeting scheduled for August 25, 2011, CSR shareholders will be asked to consider and vote on the following resolutions relating to CSRs share capital:
Ordinary Resolutions
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authorize CSRs board of directors to allot a sufficient number of ordinary shares as are issuable in connection with the merger;
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approve a new executive bonus plan to be known as the CSR 2011 Executive Bonus Plan;
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approve amendments to the existing CSR Share Option Plan to include limits on the market value of shares placed under option to any eligible employee;
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authorize CSRs board of directors, in substitution of any similar previous authority with respect to allotment granted in the annual general
meeting, to allot ordinary shares up to a nominal amount equal to approximately one third of the expected issued ordinary share capital of CSR following closing of the merger and, subject to certain conditions, up to a nominal amount equal to
approximately two thirds of the expected issued ordinary share capital of CSR following closing of the merger by way of a rights issue.
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Special Resolutions
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subject to certain conditions, and in substitution of any similar previous authority with respect to allotment in cash granted in the annual general
meeting, give CSRs board of directors the power until the end of next years annual general meeting (or, if earlier, until the close of business on June 30, 2012) to allot ordinary shares up to a nominal amount equal to approximately five
per cent. of the expected issued ordinary share capital of CSR following closing of the merger for cash as if pre-emption rights in respect of such shares do not apply;
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subject to certain conditions, and in substitution of any similar previous authority with respect to repurchase of ordinary shares granted in the
annual general meeting, authorize CSR, until the conclusion of the next annual general meeting of CSR to be held in 2012 (or, if earlier, at the close of business on June 30, 2012), to purchase its own fully paid ordinary shares (up to a maximum
amount equal to approximately ten per cent. of the expected issued ordinary share capital of CSR following closing of the merger) by way of one or more market purchases.
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Mandatory Bids, Squeeze-out and Sell-out Rules Relating to the Ordinary Shares Underlying the CSR ADSs to be Issued in Connection with the Merger
Mandatory bid
The City Code on Takeovers and Mergers, or the City Code, applies to CSR. Under the City Code, if an acquisition of ordinary shares were to increase the aggregate holding of an acquiror and its concert
parties to shares carrying 30% or more of the voting rights in CSR, the acquiror and, depending on the circumstances, its concert parties (as defined in the City Code), would be required (except with the consent of the Panel on Takeovers and
Mergers) to make a cash offer for the outstanding shares in CSR at a price not less than the highest price paid for the ordinary shares by the acquiror or its concert parties during the previous 12 months. This requirement would also be triggered by
any acquisition of shares by a person holding (together with its concert parties) shares carrying between 30 and 50% of the voting rights in CSR if the effect of such acquisition were to increase that persons percentage of the voting rights.
Squeeze-out
Under the Companies Act 2006, if an offeror were to acquire or unconditionally contract to acquire 90% of the shares to which the offer relates and 90% of the voting rights attached to those shares, then,
within three months of the last day on which its offer can be accepted, it could compulsorily acquire the remaining 10%. It would do so by sending a notice to outstanding shareholders telling them that it will compulsorily acquire their shares and
then, six weeks later, it would execute a transfer of the outstanding shares in its favor and pay the consideration to CSR, which would hold the consideration on trust for outstanding shareholders. The consideration offered to the shareholders whose
shares are compulsorily acquired under the U.K. Companies Act 2006 must, in general, be the same as the consideration that was available under the takeover offer.
Sell-out
The Companies Act 2006 would also give CSRs minority
shareholders a right to be bought out in certain circumstances by an offeror who had made a takeover offer. If at any time before the end of the period within which a takeover offer could be accepted, the offeror holds or has unconditionally
contracted to acquire with or without any other shares in CSR that the offeror has acquired or contracted to acquire (i) not less than 90% in value of all the voting shares in CSR and (ii) shares that carry not less than 90% of the voting
rights in CSR, then any holder of shares to which the offer related who had not accepted the offer could by a written communication to the offeror require it to acquire those shares.
The offeror would be required to give any CSR shareholder notice of his right to be bought out within one month of that right arising.
Sell-out rights cannot be exercised after the end of the period of three months from the last date on which the offer can be accepted or, if later, three months from the date on which the notice is served on the CSR shareholders notifying them of
their sell-out rights. If a shareholder of CSR exercises his/her rights, the offeror is bound to acquire those shares on the terms of the offer or on such other terms as may be agreed.
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Public Takeover Bids in the Last and Current Financial Years
There have been no public takeover bids by third parties in respect of the share capital of CSR in the last or current financial year.
Exchange Controls and Other Limitations Affecting CSR Shareholders
There are currently no foreign exchange control restrictions on CSRs ability to pay dividends on its ordinary shares or on the
conduct of its operations imposed by English law.
There are currently no limitations on the right of non-residents or foreign
owners to hold or vote CSR ordinary shares imposed by English law or CSRs articles of association.
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DESCRIPTION OF CSR AMERICAN DEPOSITARY SHARES
American Depositary Receipts
JPMorgan Chase Bank, N.A., as depositary will issue the ADSs which you will be entitled to receive in the merger. Each ADS will represent an ownership interest in four ordinary shares which CSR will
deposit with the custodian, as agent of the depositary, under the deposit agreement among CSR, the depositary and yourself as an ADR holder. In the future, each ADS will also represent any securities, cash or other property deposited with the
depositary but which they have not distributed directly to you. Unless specifically requested by you, all ADSs will be issued on the books of the depositary in book-entry form and periodic statements will be mailed to you which reflect your
ownership interest in such ADSs. In this description, references to American depositary receipts, or ADRs, shall include the statements you will receive which reflect your ownership of ADSs.
The depositarys office is located at 1 Chase Manhattan Plaza, Floor 58, New York, NY, 10005-1401.
You may hold ADSs either directly or indirectly through your broker or other financial institution. If you hold ADSs directly, by having
an ADS registered in your name on the books of the depositary, you are an ADR holder. This description assumes you hold your ADSs directly. If you hold the ADSs through your broker or financial institution nominee, you must rely on the procedures of
such broker or financial institution to assert the rights of an ADR holder described in this section. You should consult with your broker or financial institution to find out what those procedures are.
As an ADR holder, CSR will not treat you as a shareholder of it and you will not have any shareholder rights. The laws of England govern
shareholder rights. Because the depositary or its nominee will be the shareholder of record for the shares represented by all outstanding ADSs, shareholder rights rest with such record holder. Your rights are those of an ADR holder. Such rights
derive from the terms of the deposit agreement to be entered into among CSR, the depositary and all registered holders from time to time of ADSs issued under the deposit agreement. The obligations of the depositary and its agents are also set out in
the deposit agreement. Because the depositary or its nominee will actually be the registered owner of the ordinary shares, you must rely on it to exercise the rights of a shareholder on your behalf. The deposit agreement and the ADSs are governed by
New York law.
The following is a summary of what CSR believes to be the material terms of the deposit agreement.
Notwithstanding this, because it is a summary, it may not contain all the information that you may otherwise deem important. For more complete information, you should read the entire deposit agreement and the form of ADR which contains the terms of
your ADSs. You can read a copy of the deposit agreement which is filed as an exhibit to the registration statement of which this proxy statement/prospectus forms a part. You may also obtain a copy of the deposit agreement at the SECs Public
Reference Room which is located at 100 F Street, NE, Washington, DC 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-732-0330. You may also find the registration statement and the attached
deposit agreement on the SECs website at http://www.sec.gov.
Share Dividends and Other Distributions
How will I receive dividends and other distributions on the CSR ordinary shares underlying my ADSs?
CSR may make various types of distributions with respect to its securities. The depositary has agreed that, to the extent practicable, it
will pay to you the cash dividends or other distributions it or the custodian receives on ordinary shares or other deposited securities, after converting any cash received into U.S. dollars and, in all cases, making any necessary deductions provided
for in the deposit agreement. You will receive these distributions in proportion to the number of underlying securities that your ADSs represent.
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Except as stated below, the depositary will deliver such distributions to ADR holders in
proportion to their interests in the following manner:
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Cash.
The depositary will distribute any U.S. dollars available to it resulting from a cash dividend or other cash distribution or the net
proceeds of sales of any other distribution or portion thereof (to the extent applicable), on an averaged or other practicable basis, subject to (i) appropriate adjustments for taxes withheld, (ii) such distribution being impermissible or
impracticable with respect to certain registered ADR holders, and (iii) deduction of the depositarys expenses in (1) converting any foreign currency to U.S. dollars to the extent that it determines that such conversion may be made on
a reasonable basis, (2) transferring foreign currency or U.S. dollars to the United States by such means as the depositary may determine to the extent that it determines that such transfer may be made on a reasonable basis, (3) obtaining
any approval or license of any governmental authority required for such conversion or transfer, which is obtainable at a reasonable cost and within a reasonable time and (4) making any sale by public or private means in any commercially
reasonable manner.
If exchange rates fluctuate during a time when the depositary cannot convert a foreign currency, you may lose some or all of the value of the distribution.
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Shares.
In the case of a distribution in ordinary shares, the depositary will issue additional ADRs to evidence the number of ADSs representing
such ordinary shares. Only whole ADSs will be issued. Any ordinary shares which would result in fractional ADSs will be sold and the net proceeds will be distributed in the same manner as cash to the ADR holders entitled thereto.
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Rights to receive additional shares.
In the case of a distribution of rights to subscribe for additional ordinary shares or other rights, if CSR
provides evidence satisfactory to the depositary that it may lawfully distribute such rights, the depositary will distribute warrants or other instruments in the discretion of the depositary representing such rights. However, if CSR does not furnish
such evidence, the depositary may:
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sell such rights if practicable and distribute the net proceeds in the same manner as cash to the ADR holders entitled thereto; or
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if it is not practicable to sell such rights, do nothing and allow such rights to lapse, in which case ADR holders will receive nothing.
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CSR has no obligation to file a registration statement under the Securities Act in order to
make any rights available to ADR holders.
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Other Distributions.
In the case of a distribution of securities or property other than those described above, the depositary may either
(i) distribute such securities or property in any manner it deems equitable and practicable or (ii) to the extent the depositary deems distribution of such securities or property not to be equitable and practicable, sell such securities or
property and distribute any net proceeds in the same way it distributes cash.
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If the depositary determines
that any distribution described above is not practicable with respect to any specific registered ADR holder, the depositary may, after consultation with CSR if practicable, choose any method of distribution that it deems practicable for such ADR
holder, including the distribution of foreign currency, securities or property, or it may retain such items, without paying interest on or investing them, on behalf of the ADR holder as deposited securities, in which case the ADSs will also
represent the retained items.
Any U.S. dollars will be distributed by checks drawn on a bank in the United States for whole
dollars and cents. Fractional cents will be withheld without liability and dealt with by the depositary in accordance with its then current practices.
The depositary is not responsible if it decides that it is unlawful or impractical to make a distribution available to any ADR holders.
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There can be no assurance that the depositary will be able to convert any currency at a
specified exchange rate or sell any property, rights, shares or other securities at a specified price, nor that any of such transactions can be completed within a specified time period.
Deposit, Withdrawal and Cancellation
How does the depositary issue
ADSs?
The depositary will issue ADSs if you or your broker deposit ordinary shares or evidence of rights to receive
ordinary shares with the custodian and pay the fees and expenses owing to the depositary in connection with such issuance. In the case of the ADSs to be issued under this proxy statement/prospectus, CSR will arrange to deposit such ordinary shares.
Ordinary shares deposited in the future with the custodian must be accompanied by certain delivery documentation, including
instruments showing that such ordinary shares have been properly transferred or endorsed to the person on whose behalf the deposit is being made.
The custodian will hold all deposited ordinary shares (including those being deposited by CSR in connection with the offering to which this proxy statement/prospectus relates) for the account of the
depositary. ADR holders thus have no direct ownership interest in the deposited ordinary shares and only have such rights as are contained in the deposit agreement. The custodian will also hold any additional securities, property and cash received
on or in substitution for the deposited ordinary shares. The deposited ordinary shares and any such additional items are referred to as deposited securities.
Upon each deposit of ordinary shares, receipt of related delivery documentation and compliance with the other provisions of the deposit agreement, including the payment of the fees and charges of the
depositary and any taxes or other fees or charges owing, the depositary will issue an ADR or ADRs in the name or upon the order of the person entitled thereto evidencing the number of ADSs to which such person is entitled. All of the ADSs issued
will, unless specifically requested to the contrary, be part of the depositarys direct registration system, and a registered holder will receive periodic statements from the depositary which will show the number of ADSs registered in such
holders name. An ADR holder can request that the ADSs not be held through the depositarys direct registration system and that a certificated ADR be issued.
How do ADR holders cancel an ADS and obtain deposited securities?
When you turn in your ADR certificate at the depositarys office, or when you provide proper instructions and documentation in the
case of direct registration ADSs, the depositary will, upon payment of certain applicable fees, charges and taxes, deliver the underlying ordinary shares to you or upon your written order. At your risk, expense and request, the depositary may
deliver deposited securities at such other place as you may request.
The depositary may only restrict the withdrawal of
deposited securities in connection with:
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temporary delays caused by the closing of CSRs transfer books or those of the depositary or the deposit of ordinary shares in connection with
voting at a shareholders meeting, or the payment of dividends;
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the payment of fees, taxes and similar charges; or
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compliance with any U.S. or foreign laws or governmental regulations relating to the ADRs or to the withdrawal of deposited securities.
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This right of withdrawal may not be limited by any other provision of the deposit agreement.
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Record Dates
The depositary may, after consultation with CSR if practicable, fix record dates for the determination of the registered ADR holders who will be entitled (or obligated, as the case may be):
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to receive any distribution on or in respect of ordinary shares,
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to give instructions for the exercise of voting rights at a meeting of holders of ordinary shares, or
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to pay the fee assessed by the depositary for administration of the ADR program and for any expenses as provided for in the ADR,
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to receive any notice or to act in respect of other matters
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all subject to the provisions of the deposit agreement.
Voting Rights
How do I vote?
If you are an ADR holder, you may instruct the depositary how to exercise the voting rights for the ordinary shares which underlie your ADSs. As soon as practicable after receiving notice of any meeting
or solicitation of consents or proxies from CSR, the depositary will distribute to the registered ADR holders a notice stating such information as is contained in the voting materials received by the depositary and describing how you may instruct
the depositary to exercise the voting rights for the ordinary shares which underlie your ADSs, including instructions for giving a discretionary proxy to a person designated by CSR. For instructions to be valid, the depositary must receive them in
the manner and on or before the date specified. The depositary will try, as far as is practical, subject to the provisions of and governing the underlying ordinary shares or other deposited securities, to vote or to have its agents vote the ordinary
shares or other deposited securities as you instruct. The depositary will only vote or attempt to vote as you instruct. The depositary will not itself exercise any voting discretion. Furthermore, neither the depositary nor its agents are responsible
for any failure to carry out any voting instructions, for the manner in which any vote is cast or for the effect of any vote. Notwithstanding anything contained in the deposit agreement or any ADR, at CSRs request the depositary may, to the
extent not prohibited by law or regulations, or by the requirements of the stock exchange on which the ADSs are listed, in lieu of distribution of the materials provided to the depositary in connection with any meeting of, or solicitation of
consents or proxies from, holders of deposited securities, distribute to the registered holders of ADRs a notice that provides such holders with, or otherwise publicizes to such holders, instructions on how to retrieve such materials or receive such
materials upon request (
i.e.
, by reference to a website containing the materials for retrieval and/or a contact for requesting copies of the materials).
Under CSRs constituent documents, the depositary would be able to provide it with voting instructions without having to personally attend meetings in person or by proxy. While CSR will endeavor to
provide the depositary with sufficient prior notice of meetings of shareholders so as to enable it to solicit voting instructions, there is no guarantee that you will receive voting materials in time to instruct the depositary to vote and it is
possible that you, or persons who hold their ADSs through brokers, dealers or other third parties, will not have the opportunity to exercise a right to vote.
Reports and Other Communications
Will ADR holders be able to view
CSRs reports?
The depositary will make available for inspection by ADR holders at the offices of the depositary
and the custodian the deposit agreement, the provisions of or governing deposited securities, and any written communications from CSR which are both received by the custodian or its nominee as a holder of deposited securities and made generally
available to the holders of deposited securities.
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Additionally, if CSR makes any written communications generally available to holders of its
ordinary shares, and CSR furnishes copies thereof to the depositary, it will distribute the same to registered ADR holders.
Fees and
Expenses
What fees and expenses will I be responsible for paying?
The depositary may charge each person to whom ADSs are issued, including, without limitation, issuances against deposits of ordinary
shares, issuances in respect of share distributions, rights and other distributions, issuances pursuant to a stock dividend or stock split declared by CSR or issuances pursuant to a merger, exchange of securities or any other transaction or event
affecting the ADSs or deposited securities, and each person surrendering ADSs for withdrawal of deposited securities or whose ADRs are cancelled or reduced for any other reason, $5.00 or less for each 100 ADSs (or any portion thereof) issued,
delivered, reduced, cancelled or surrendered, as the case may be. The depositary may sell (by public or private sale) sufficient securities and property received in respect of a share distribution, rights and/or other distribution prior to such
deposit to pay such charge.
The following additional charges shall be incurred by the ADR holders, by any party depositing or
withdrawing ordinary shares or by any party surrendering ADSs or to whom ADSs are issued (including, without limitation, issuance pursuant to a stock dividend or stock split declared by CSR or an exchange of stock regarding the ADRs or the deposited
securities or a distribution of ADSs), whichever is applicable:
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a fee of US$1.50 per ADR or ADRs for transfers of certificated or direct registration ADRs;
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a fee of US$0.05 or less per ADS for any cash distribution made pursuant to the deposit agreement;
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a fee of up to US$0.05 per ADS per calendar year (or portion thereof) for services performed by the depositary in administering the ADRs (which fee may
be charged on a periodic basis during each calendar year and shall be assessed against holders of ADRs as of the record date or record dates set by the depositary during each calendar year and shall be payable in the manner described in the next
succeeding provision);
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reimbursement of such fees, charges and expenses as are incurred by the depositary and/or any of the depositarys agents (including, without
limitation, the custodian and expenses incurred on behalf of holders in connection with compliance with foreign exchange control regulations or any law or regulation relating to foreign investment) in connection with the servicing of the ordinary
shares or other deposited securities, the delivery of deposited securities or otherwise in connection with the depositarys or its custodians compliance with applicable law, rule or regulation (which charge shall be assessed on a
proportionate basis against holders as of the record date or dates set by the depositary and shall be payable at the sole discretion of the depositary by billing such holders or by deducting such charge from one or more cash dividends or other cash
distributions);
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a fee for the distribution of securities (or the sale of securities in connection with a distribution), such fee being in an amount equal to the fee
for the execution and delivery of ADSs which would have been charged as a result of the deposit of such securities (treating all such securities as if they were shares) but which securities or the net cash proceeds from the sale thereof are instead
distributed by the depositary to those holders entitled thereto;
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stock transfer or other taxes and other governmental charges (which are payable by holders or persons depositing ordinary shares unless paid for by
CSR);
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cable, telex and facsimile transmission and delivery charges incurred at your request in connection with the deposit or delivery of ordinary shares;
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transfer or registration fees for the registration of transfer of deposited securities on any applicable register in connection with the deposit or
withdrawal of deposited securities; and
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expenses of the depositary in connection with the conversion of foreign currency into U.S. dollars.
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CSR will pay all other charges and expenses of the depositary and any agent of the depositary (except the custodian) pursuant to
agreements from time to time between CSR and the depositary. The charges described above may be amended from time to time by agreement between CSR and the depositary.
The depositary has agreed to reimburse CSR for certain expenses it incurs that are related to establishment and maintenance of the ADR program, including investor relations expenses and exchange
application and listing fees.
Neither the depositary nor CSR can determine the exact amount to be made available to CSR
because (i) the number of ADSs that will be issued and outstanding, (ii) the level of fees to be charged to holders of ADSs and (iii) CSRs reimbursable expenses related to the ADR program are not known at this time. The
depositary collects its fees for issuance and cancellation of ADSs directly from investors depositing ordinary shares or surrendering ADSs for the purpose of withdrawal or from intermediaries acting for them. The depositary collects fees for making
distributions to investors by deducting those fees from the amounts distributed or by selling a portion of distributable property to pay the fees. The depositary may collect its annual fee for depositary services by deduction from cash
distributions, or by directly billing investors, or by charging the book-entry system accounts of participants acting for them. The depositary will generally set off the amounts owing from distributions made to holders of ADSs. If, however, no
distribution exists and payment owing is not timely received by the depositary, the depositary may refuse to provide any further services to holders that have not paid those fees and expenses owing until such fees and expenses have been paid. At the
discretion of the depositary, all fees and charges owing under the deposit agreement are due in advance and/or when declared owing by the depositary.
Payment of Taxes
Unless already paid by CSR, ADR holders must pay any tax
or other governmental charge payable by the custodian or the depositary on any ADS or ADR, deposited security or distribution. If an ADR holder owes any tax or other governmental charge, the depositary may (i) deduct the amount thereof from any
cash distributions, or (ii) sell deposited securities (by public or private sale) and deduct the amount owing from the net proceeds of such sale. In either case the ADR holder remains liable for any shortfall. Additionally, if any tax or
governmental charge is unpaid, the depositary may also refuse to effect any registration, registration of transfer, split-up or combination of deposited securities or withdrawal of deposited securities until such payment is made. If any tax or
governmental charge is required to be withheld on any cash distribution, the depositary may deduct the amount required to be withheld from any cash distribution or, in the case of a non-cash distribution, sell the distributed property or securities
(by public or private sale) to pay such taxes and distribute any remaining net proceeds to the ADR holders entitled thereto.
By holding an ADR or an interest therein, you will be agreeing to indemnify CSR, the depositary, its custodian and any of CSRs or
their respective directors, employees, agents and affiliates against, and hold each of them harmless from, any claims by any governmental authority with respect to taxes, additions to tax, penalties or interest arising out of any refund of taxes,
reduced rate of withholding at source or other tax benefit obtained.
Reclassifications, Recapitalizations and Mergers
If CSR takes certain actions that affect the deposited securities, including (i) any change in par value, split-up, consolidation,
cancellation or other reclassification of deposited securities or (ii) any distributions not made to holders of ADRs or (iii) any recapitalization, reorganization, merger, consolidation, liquidation, receivership, bankruptcy or sale of all
or substantially all of its assets, then the depositary may choose to:
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amend the form of ADR;
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distribute additional or amended ADRs;
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(3)
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distribute cash, securities or other property it has received in connection with such actions;
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(4)
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sell any securities or property received and distribute the proceeds as cash; or
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If the
depositary does not choose any of the above options, any of the cash, securities or other property it receives will constitute part of the deposited securities and each ADS will then represent a proportionate interest in such property.
Amendment and Termination
How may the deposit agreement be amended?
CSR may agree with the depositary to amend the deposit agreement and the ADSs without your consent for any reason. ADR holders must be given at least 30 days notice of any amendment that imposes or
increases any fees or charges (other than stock transfer or other taxes and other governmental charges, transfer or registration fees, cable, telex or facsimile transmission costs, delivery costs or other such expenses), or otherwise prejudices any
substantial existing right of ADR holders. Such notice need not describe in detail the specific amendments effectuated thereby, but must give ADR holders a means to access the text of such amendment. If an ADR holder continues to hold an ADR or ADRs
after being so notified, such ADR holder is deemed to agree to such amendment and to be bound by the deposit agreement as so amended. Notwithstanding the foregoing, if any governmental body or regulatory body should adopt new laws, rules or
regulations which would require amendment or supplement of the deposit agreement or the form of ADR to ensure compliance therewith, CSR and the depositary may amend or supplement the deposit agreement and the ADR at any time in accordance with such
changed laws, rules or regulations, which amendment or supplement may take effect before a notice is given or within any other period of time as required for compliance. No amendment, however, will impair your right to surrender your ADSs and
receive the underlying securities, except in order to comply with mandatory provisions of applicable law.
How may the
deposit agreement be terminated?
The depositary may, and shall at CSRs written direction,
terminate the deposit agreement and the ADRs by mailing notice of such termination to the registered holders of ADRs at least 30 days prior to the date fixed in such notice for such termination; provided, however, if the depositary shall have
(i) resigned as depositary under the deposit agreement, notice of such termination by the depositary shall not be provided to registered holders unless a successor depositary shall not be operating under the deposit agreement within 45 days of
the date of such resignation, and (ii) been removed as depositary under the deposit agreement, notice of such termination by the depositary shall not be provided to registered holders of ADRs unless a successor depositary shall not be operating
under the deposit agreement on the 90
th
day after
CSRs notice of removal was first provided to the depositary. After termination, the depositarys only responsibility will be (i) to deliver deposited securities to ADR holders who surrender their ADRs, and (ii) to hold or sell
distributions received on deposited securities. As soon as practicable after the expiration of six months from the termination date, the depositary will sell the deposited securities which remain and hold the net proceeds of such sales (as long as
it may lawfully do so), without liability for interest, in trust for the ADR holders who have not yet surrendered their ADRs. After making such sale, the depositary shall have no obligations except to account for such proceeds and other cash.
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Limitations on Obligations and Liability to ADR holders
Limits on CSRs obligations and the obligations of the depositary; limits on liability to ADR holders and holders of ADSs
Prior to the issue, registration, registration of transfer, split-up, combination, or cancellation of any ADRs, or the
delivery of any distribution in respect thereof, and from time to time, CSR or the depositary or its custodian may require:
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payment with respect thereto of (i) any stock transfer or other tax or other governmental charge, (ii) any stock transfer or registration
fees in effect for the registration of transfers of ordinary shares or other deposited securities upon any applicable register and (iii) any applicable fees and expenses described in the deposit agreement;
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the production of proof satisfactory to it of (i) the identity of any signatory and genuineness of any signature and (ii) such other
information, including without limitation, information as to citizenship, residence, exchange control approval, beneficial ownership of any securities, compliance with applicable law, regulations, provisions of or governing deposited securities and
terms of the deposit agreement and the ADRs, as it may deem necessary or proper; and
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compliance with such regulations as the depositary may establish consistent with the deposit agreement.
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The issuance of ADRs, the acceptance of deposits of ordinary shares, the registration, registration of transfer, split-up or combination
of ADRs or the withdrawal of ordinary shares, may be suspended, generally or in particular instances, when the ADR register or any register for deposited securities is closed or when any such action is deemed advisable by the depositary; provided
that the ability to withdraw ordinary shares may only be limited under the following circumstances: (i) temporary delays caused by closing transfer books of the depositary or CSRs transfer books or the deposit of ordinary shares in
connection with voting at a shareholders meeting, or the payment of dividends, (ii) the payment of fees, taxes, and similar charges, and (iii) compliance with any laws or governmental regulations relating to ADRs or to the withdrawal
of deposited securities.
The deposit agreement expressly limits the obligations and liability of the depositary, CSR and
their respective agents. Neither CSR nor the depositary nor any such agent will be liable if:
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any present or future law, rule, regulation, fiat, order or decree of the United States, England and Wales or any other country, or of any governmental
or regulatory authority or securities exchange or market or automated quotation system, the provisions of or governing any deposited securities, any present or future provision of CSRs articles of association, any act of God, war, terrorism or
other circumstance beyond CSRs, the depositarys or their respective agents control shall prevent or delay, or shall cause any of them to be subject to any civil or criminal penalty in connection with, any act which the deposit
agreement or the ADRs provide shall be done or performed by CSR, the depositary or their respective agents (including, without limitation, voting);
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it exercises or fails to exercise discretion under the deposit agreement or the ADR;
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it performs its obligations under the deposit agreement and ADRs without gross negligence or bad faith;
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it takes any action or refrains from taking any action in reliance upon the advice of or information from legal counsel, accountants, any person
presenting ordinary shares for deposit, any registered holder of ADRs, or any other person believed by it to be competent to give such advice or information; or
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it relies upon any written notice, request, direction or other document believed by it to be genuine and to have been signed or presented by the proper
party or parties.
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Neither the depositary nor its agents have any obligation to appear in, prosecute or
defend any action, suit or other proceeding in respect of any deposited securities or the ADRs. CSR and its agents shall only be obligated to
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appear in, prosecute or defend any action, suit or other proceeding in respect of any deposited securities or the ADRs, which in CSRs opinion may involve it in expense or liability, if
indemnity satisfactory to it against all expense (including fees and disbursements of counsel) and liability is furnished as often as may be required. The depositary and its agents may fully respond to any and all demands or requests for information
maintained by or on its behalf in connection with the deposit agreement, any registered holder or holders of ADRs, any ADRs or otherwise related to the deposit agreement or ADRs to the extent such information is requested or required by or pursuant
to any lawful authority, including without limitation laws, rules, regulations, administrative or judicial process, banking, securities or other regulators. The depositary shall not be liable for the acts or omissions made by any securities
depository, clearing agency or settlement system in connection with or arising out of book-entry settlement of deposited securities or otherwise. Furthermore, the depositary shall not be responsible for, and shall incur no liability in connection
with or arising from, the insolvency of any custodian that is not a branch or affiliate of JPMorgan Chase Bank, N.A. The depositary and the custodian(s) may use third party delivery services and providers of information regarding matters such as
pricing, proxy voting, corporate actions, class action litigation and other services in connection with the ADRs and the deposit agreement, and use local agents to provide extraordinary services such as attendance at annual meetings of issuers of
securities. Although the depositary and the custodian will use reasonable care (and cause their agents to use reasonable care) in the selection and retention of such third party providers and local agents, they will not be responsible for any errors
or omissions made by such third party providers and local agents in providing the relevant information or services.
Additionally, none of CSR, the depositary or the custodian shall be liable for the failure by any registered holder of ADRs or beneficial
owner therein to obtain the benefits of credits on the basis of non-U.S. tax paid against such holders or beneficial owners income tax liability. Neither CSR nor the depositary shall incur any liability for any tax consequences that may
be incurred by holders or beneficial owners on account of their ownership of ADRs or ADSs.
Neither the depositary nor its
agents will be responsible for any failure to carry out any instructions to vote any of the deposited securities, for the manner in which any such vote is cast or for the effect of any such vote. None of CSR, the depositary or any of their agents
shall be liable to registered holders of ADRs or beneficial owners of interests in ADSs for any indirect, special, punitive or consequential damages (including, without limitation, lost profits) of any form incurred by any person or entity, whether
or not foreseeable and regardless of the type of action in which such a claim may be brought.
In the deposit agreement each
party thereto (including, for avoidance of doubt, each holder and beneficial owner and/or holder of interests in ADRs) irrevocably waives, to the fullest extent permitted by applicable law, any right it may have to a trial by jury in any suit,
action or proceeding against the depositary and/or the Company directly or indirectly arising out of or relating to the ordinary shares or other deposited securities, the ADSs or the ADRs, the deposit agreement or any transaction contemplated
therein, or the breach thereof (whether based on contract, tort, common law or any other theory).
The depositary may own and
deal in any class of CSRs securities and in ADSs.
Disclosure of Interest in ADSs
To the extent that the provisions of or governing any deposited securities may require disclosure of or impose limits on beneficial or
other ownership of deposited securities, other ordinary shares and other securities and may provide for blocking transfer, voting or other rights to enforce such disclosure or limits, you agree to comply with all such disclosure requirements and
ownership limitations and to comply with any reasonable instructions CSR may provide in respect thereof. CSR reserves the right to instruct you to deliver your ADSs for cancellation and withdrawal of the deposited securities so as to permit CSR to
deal with you directly as a holder of ordinary shares and, by holding an ADS or an interest therein, you will be agreeing to comply with such instructions. CSR may request holders or former holders of ADRs to provide information as to the capacity
in
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which such holders hold or held ADRs and regarding the identity of any other persons then or previously interested in such ADRs and the nature of such interest and various other matters as may be
required to comply with applicable law or CSRs Articles of Association, and each holder of ADRs agrees to provide any information so requested.
Notwithstanding any provision of the deposit agreement or of the ADRs and without limiting the foregoing, each holder of ADRs agrees to provide such information as CSR may request in a disclosure notice
given pursuant to the Companies Act 2006 or CSRs Articles of Association. By accepting or holding an ADR, each holder acknowledges that it understands that failure to comply with a disclosure notice may result in the imposition of sanctions
against a holder of the ordinary shares in respect of which the non-complying person is or was, or appears to be or has been, interested as provided in the Companies Act 2006 and the Articles of Association which currently include the withdrawal of
the voting rights of such ordinary shares and the imposition of restrictions on the rights to receive dividends on and to transfer such ordinary shares. In addition, by accepting or holding an ADR each holder agrees to comply with the provisions of
the United Kingdom Disclosure and Transparency Rules (as amended from time to time, the DTRs) with regard to notifying CSR of interests in ordinary shares and certain financial instruments, which currently provide,
inter alia
,
that a holder must notify CSR of the percentage of its voting rights he holds as shareholder or holds or is deemed to hold through his direct or indirect holding of certain financial instruments (or a combination of such holdings) if the percentage
of those voting rights (i) reaches, exceeds or falls below 3%, 4%, 5%, 6%, 7%, 8%, 9%, 10% and each 1% threshold thereafter up to 100% as a result of an acquisition or disposal of ordinary shares or certain financial instruments, or
(ii) reaches, exceeds or falls below such applicable thresholds as a result of events changing the breakdown of voting rights and on the basis of information disclosed by CSR in accordance with the DTRs. The notification must be effected as
soon as possible, but not later than two trading days after you (a) learn of the acquisition or disposal or of the possibility of exercising voting rights, or on which, having regard to the circumstances, should have learned of it, regardless
of the date on which the acquisition, disposal or possibility of exercising voting rights takes effect, or (b) is informed of the event mentioned in (ii) above.
Books of Depositary
The depositary or its agent will maintain a register
for the registration, registration of transfer, combination and split-up of ADRs, which register shall include the depositarys direct registration system. Registered holders of ADRs may inspect such records at the depositarys office at
all reasonable times, but solely for the purpose of communicating with other holders in the interest of CSRs business or a matter relating to the deposit agreement. Such register may be closed from time to time, when deemed expedient by the
depositary.
The depositary will maintain facilities for the delivery and receipt of ADRs.
Pre-release of ADSs
In
its capacity as depositary, the depositary shall not lend ordinary shares or ADSs; provided, however, that the depositary may (i) issue ADSs prior to the receipt of ordinary shares and (ii) deliver ordinary shares prior to the receipt of
ADSs for withdrawal of deposited securities, including ADSs which were issued under (i) above but for which ordinary shares may not have been received (each such transaction a pre-release). The depositary may receive ADSs in lieu of
ordinary shares under (i) above (which ADSs will promptly be canceled by the depositary upon receipt by the depositary) and receive ordinary shares in lieu of ADSs under (ii) above. Each such pre-release will be subject to a written
agreement whereby the person or entity (the applicant) to whom ADSs or ordinary shares are to be delivered (a) represents that at the time of the pre-release the applicant or its customer owns the ordinary shares or ADSs that are to
be delivered by the applicant under such pre-release, (b) agrees to indicate the depositary as owner of such ordinary shares or ADSs in its records and to hold such ordinary shares or ADSs in trust for the depositary until such ordinary shares
or ADSs are delivered to the depositary or the custodian, (c) unconditionally guarantees to deliver to the depositary or the custodian, as applicable, such ordinary shares or ADSs, and (d) agrees to any additional restrictions or
requirements that the
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depositary deems appropriate. Each such pre-release will be at all times fully collateralized with cash, U.S. government securities or such other collateral as the depositary deems
appropriate, terminable by the depositary on not more than five (5) business days notice and subject to such further indemnities and credit regulations as the depositary deems appropriate. The depositary will normally limit the number of
ADSs and ordinary shares involved in such pre-release at any one time to thirty percent (30%) of the ADSs outstanding (without giving effect to ADSs outstanding under (i) above), provided, however, that the depositary reserves the right to
change or disregard such limit from time to time as it deems appropriate. The depositary may also set limits with respect to the number of ADSs and ordinary shares involved in pre-release with any one person on a case-by-case basis as it deems
appropriate. The depositary may retain for its own account any compensation received by it in conjunction with the foregoing. Collateral provided in connection with pre-release transactions, but not the earnings thereon, shall be held for the
benefit of the registered holders of ADRs (other than the applicant).
Appointment
In the deposit agreement, each registered holder of ADRs and each person holding an interest in ADSs, upon acceptance of any ADSs (or any
interest therein) issued in accordance with the terms and conditions of the deposit agreement will be deemed for all purposes to:
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be a party to and bound by the terms of the deposit agreement and the applicable ADR or ADRs, and
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appoint the depositary its attorney-in-fact, with full power to delegate, to act on its behalf and to take any and all actions contemplated in the
deposit agreement and the applicable ADR or ADRs, to adopt any and all procedures necessary to comply with applicable laws and to take such action as the depositary in its sole discretion may deem necessary or appropriate to carry out the purposes
of the deposit agreement and the applicable ADR and ADRs, the taking of such actions to be the conclusive determinant of the necessity and appropriateness thereof.
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Governing Law
The deposit agreement and the ADRs shall be governed by and
construed in accordance with the laws of the State of New York. In the deposit agreement, CSR has submitted to the jurisdiction of the courts of the State of New York and appointed an agent for service of process on its behalf.
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COMPARISON OF RIGHTS OF ZORAN STOCKHOLDERS AND CSR
SHAREHOLDERS
As a result of the merger, Zoran stockholders will be entitled to receive a portion of the merger
consideration in CSR ADSs. Each CSR ADS represents four CSR ordinary shares. Zoran is incorporated in the State of Delaware and CSR is incorporated under the laws of England and Wales. The following is a summary comparison of material differences
between the rights of a Zoran stockholder and a holder of CSR ordinary shares arising from the differences between the corporate laws of Delaware and those of England and Wales, the governing instruments of the two companies, and the securities laws
and regulations governing the two companies. The rights of a holder of CSR ADSs will also be governed by the deposit agreement. This summary is not a complete description of the laws of Delaware or of England and Wales, the other rules or laws
referred to in this summary, Zorans certificate of incorporation, Zorans bylaws or CSRs memorandum of association and CSRs articles of association. For a description of the rights of holders of CSR ADSs, see Description
of CSR American Depositary Shares. For information on how to obtain the governing instruments of Zoran and CSR, see Where You Can Find More Information. Zoran stockholders are encouraged to obtain and read these documents.
Unless the context otherwise requires, references to shareholder or shareholders or
stockholder or stockholders means the person(s) whose name(s) appear on a companys register of members or stockholders and who are the legal owners of the shares concerned.
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Current Rights of Zoran
Stockholders
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Current Rights of CSR Shareholders
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Voting Rights
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Under Delaware law, each stockholder is entitled to one vote for each share of capital stock held by the stockholder unless the certificate of incorporation provides otherwise.
Zorans certificate of incorporation does not alter the voting rights of Zoran stockholders.
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Under English law, a shareholder who is present in person and entitled to vote at a shareholders meeting is entitled to one vote on a show of hands regardless of the number
of shares he or she holds. Every proxy present who has been duly appointed by a shareholder entitled to vote on the resolution has one vote.
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The Zoran bylaws provide that the presence of the holders of a majority of the issued and outstanding stock entitled to vote, present in person or represented in proxy, constitutes
a quorum for the transaction of business at a stockholders meeting. As a general matter, the necessary vote to approve most actions is a majority of the shares voting at a meeting with a valid quorum but, as a matter of law, certain matters, such as
the merger, require the approval of holders of a majority of all the outstanding shares entitled to vote at a meeting.
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On a vote on a resolution on a poll taken at a meeting: (a) in the case of a company having a share capital, every shareholder has
one vote in respect of each share or each £10 of stock held by him or her, and (b) in any other case, every shareholder has one vote per share. A shareholder need not use all his or her votes or cast all the votes he uses in the same
way.
These provisions may be altered in the companys articles of
association.
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Under Delaware law, a certificate of incorporation may provide that in elections of directors, stockholders are entitled to cumulate votes. Zorans certificate of incorporation
does not allow cumulative voting in the election of directors.
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Current Rights of Zoran
Stockholders
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Current Rights of CSR Shareholders
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Under Zorans bylaws, every person entitled to vote or execute consents shall have the right to do so either in person or by an agent or agents authorized by a written proxy
executed by such person or his duly authorized agent, which proxy shall be filed with Zorans Secretary at or before the meeting at which it is to be used.
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Under English law, a vote by a poll may generally be demanded by (1) not less than five shareholders having the right to vote on the
resolution; or (2) any shareholder or shareholders representing at least 10% of the total voting rights of all the shareholders having the right to vote on the resolution; or (3) any shareholder or shareholders, holding shares conferring a right to
vote on the resolution, being shares on which the aggregate sum paid up is equal to not less than 10% of the total sum paid up on all the shares.
CSRs articles of association provide that resolutions put to a vote at a shareholders meeting will be decided on a show of hands, unless a
poll is demanded by:
(1) the chairman of the meeting;
(2) not less than
five members present in person or by proxy and entitled to vote;
(3) a member or members present in person or by proxy and representing in aggregate not less than one-tenth of the total voting rights of all the members having the right to vote;
or
(4) a
member or members present in person or by proxy and holding shares in CSR conferring a right to vote on the resolution being shares on which an aggregate sum has been paid up equal to not less than one-tenth of the total sum paid up on all the
shares.
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A demand for a poll may be withdrawn with the consent of the chairman of the meeting at any time before the close of the meeting or the taking of the poll, whichever is the
earlier. A demand so withdrawn shall not invalidate the result of a show of hands declared before the demand was made.
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Under English law an ordinary resolution means a resolution that is passed by a simple majority. A resolution passed at a meeting on a show of hands is passed by a simple
majority if it is passed by a simple majority of the shareholders present in person or by proxy and entitled to vote on it. A resolution passed on a poll taken at a meeting is passed by a simple majority if it is passed by members representing a
simple majority of the total voting rights of members who (being entitled to do so) vote in person or by proxy on the resolution.
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Current Rights of Zoran
Stockholders
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Current Rights of CSR Shareholders
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Under English law a special resolution means a resolution passed by a majority of not less than 75%. A resolution passed at a meeting on a show of hands is passed by a majority
of not less than 75% if it is passed by not less than 75% of the votes cast by shareholders present in person or by proxy and entitled to vote on it. A resolution passed on a poll taken at a meeting is passed by a majority of not less than 75% if it
is passed by members representing not less than 75% of the total voting rights of the members who (being entitled to do so) vote in person or by proxy on the resolution. The resolution is not a special resolution unless the notice of the meeting
included the text of the resolution and specified the intention to propose the resolution as a special resolution, and if the notice of the meeting so specified, the resolution may only be passed as a special resolution.
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Under English law, any shareholder entitled to attend and vote at a meeting is entitled to appoint a proxy to exercise all or any of his rights to attend, speak and vote at a
meeting of the company.
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Generally under English law, two shareholders present in person or by proxy constitute a quorum for the purpose of a general meeting, unless the companys articles of
association specify otherwise. CSRs articles of association specify that two members present in person or by proxy and entitled to vote constitute a quorum for all purposes.
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Cumulative voting is not recognized under English law.
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Action by Written Consent
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Under Delaware law, unless otherwise provided in the certificate of incorporation, stockholders may take any action which may be taken at a stockholders meeting without a meeting if
the action is consented to in writing by stockholders holding not less than the number of votes that would be required to authorize or take that action at a meeting at which all stockholders were present and voted.
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Under English law, shareholders of a public company such as CSR are not permitted to pass resolutions by written consent.
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Under Zorans bylaws, unless otherwise provided in Zorans certificate of incorporation, any action required by statute to be taken at any annual or special meeting of the
stockholders, or any action which may be taken at any annual or special meeting of the stockholders, may
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Current Rights of Zoran
Stockholders
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Current Rights of CSR Shareholders
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be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock
having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted.
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Shareholder Proposals and Shareholder Nominations of Directors
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Zorans bylaws provide that at an annual meeting of the stockholders, only such business shall be conducted as shall
have been properly brought before the meeting.
For business to be
properly brought before an annual meeting by a stockholder, the stockholder must have given timely notice thereof in writing to Zoran. To be timely, a stockholders notice must be received at the principal executive offices of Zoran not less
than one hundred twenty (120) calendar days in advance of the date that the Zoran proxy statement was released to stockholders in connection with the previous years annual meeting of stockholders, except that if no annual meeting was held
in the previous year or the date of the annual meeting has been advanced by more than thirty (30) calendar days from the date contemplated at the time of the previous years proxy statement, notice must be received not later than the close
of business on the tenth day following the day on which the public announcement of the date of such meeting is first made.
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Under English law, shareholders may require the directors to call a general meeting of the company and may specify the text of a resolution be voted on at that meeting if the
request is made by shareholders holding at least 5% of the total voting rights.
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Shareholders may also require the company to circulate to members of the company entitled to receive notice of a general meeting, a statement of not more than 1,000 words with
respect to (a) a matter referred to in a proposed resolution to be dealt with at that meeting, or (b) other business to be deal with at that meeting. A company is required to circulate a statement once it has received requests to do so
from (a) shareholders representing at least 5% of the total voting rights of all shareholders having a relevant right to vote at the meeting to which the requisition relates, or (b) by at least 100 shareholders who have a relevant right to
vote and hold shares in the company on which there has been paid up an average sum, per shareholder, of at least £100.
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To be in proper written form, the stockholders notice to the secretary must comply with certain requirements further described in the Section 16 of Zorans bylaws.
If requested by Zoran, such information shall be supplemented by such stockholder and beneficial owner, if any, not later than 10 days after the record date for the meeting to disclose such information as of the record date.
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Resolutions to appoint directors to a public company such as CSR must be put to shareholders on the basis of one resolution for each nominated director. A single resolution to
appoint two or more directors must not be proposed to be voted upon at a general meeting unless a resolution that it should be so made has first been agreed to by the general meeting without any vote being given against it.
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No business shall be conducted at the annual meeting of stockholders except business brought before the annual meeting in accordance with the procedures described in full in
Section 16 of Zorans bylaws. The chairman of the meeting may refuse to acknowledge the proposal of any business not made in compliance with the foregoing procedure.
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Nominations for the Zoran board of directors are also subject to additional advance notice provisions described in full in Section 28 of the bylaws.
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Current Rights of Zoran
Stockholders
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Current Rights of CSR Shareholders
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Sources and Payment of Dividends
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Under Delaware law, subject to any restriction in the corporations certificate of incorporation, the board of directors may declare and pay dividends out of (1) surplus
of the corporation which is defined as net assets less statutory capital, or (2) if no surplus exists, out of the net profits of the corporation for the year in which the dividend is declared and/or the preceding year; provided, however, that
if the capital of the corporation has been diminished to an amount less than the aggregate amount of capital represented by the issued and outstanding stock of all classes having preference upon the distribution of assets, the board of directors may
not declare and pay dividends out of the corporations net profits until the deficiency in the capital has been repaired.
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Generally speaking, and subject to the prior rights of holders of any preferred shares, under English law, a company may pay
dividends on its ordinary shares only out of its distributable profits (defined as accumulated, realized profits not previously utilized by distribution or capitalization, less accumulated, realized losses so far as not previously written off in a
reduction or reorganization) and not out of share capital, which includes share premiums (paid-in surplus).
Amounts credited to the share premium account (representing the excess of the consideration for the issue of shares over the aggregate nominal amount of such shares) may not be used to pay out cash
dividends but may be used, among other things, to pay up unissued shares that may then be distributed to shareholders in proportion to their holdings as fully paid bonus shares.
In addition, under English law, CSR will not be permitted to make a distribution if,
at the time, the amount of its net assets is less than the aggregate of its issued and paid-up share capital and undistributable reserves.
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If recommended by CSRs board of directors, CSR shareholders may, by ordinary resolution, declare final dividends, but no dividend may be declared in excess of the amount
recommended by CSRs board of directors. CSRs board of directors has the power under CSRs articles of association to pay interim dividends without the approval of shareholders to the extent the financial position of CSR justifies a
dividend in the opinion of CSRs board of directors.
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Rights of Purchase and
Redemption
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Under Delaware law, any corporation may purchase, redeem and dispose of its own shares, except that it may not purchase or redeem its shares if the capital of the corporation is
impaired or would become impaired as a result of the redemption. However, at any time, a corporation may purchase or redeem any of its shares that are entitled upon any distribution of assets to a preference over another class of its stock or, if no
shares entitled to such a preference are outstanding, any of its own shares, if these shares will be retired upon acquisition or redemption, thereby reducing the capital of the corporation.
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Under English law, a company may issue redeemable shares if authorized by its articles of association, subject to any conditions stated
therein. No redeemable shares may be issued at a time when no issued shares of the company exist which are not redeemable. CSRs articles of association permit the issuance of redeemable shares.
A company may purchase its own shares, if the purchase (1) is authorized by its
articles of association, and (2) (a) in the case of an open-market purchase, authority to make the market purchase has been given by an ordinary resolution of its shareholders, or (b) in all other cases, has first
been
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Current Rights of Zoran
Stockholders
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Current Rights of CSR Shareholders
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approved by a special resolution. CSRs articles of association authorize CSR to purchase its own shares. A resolution passed at
CSRs annual general meeting on May 18, 2011, provides the directors with authority to purchase up to 10% of the ordinary shares of the company in issue at the close of business on March 9, 2011, being the latest practicable date prior to
publication of the notice of the annual general meeting. CSR intends to renew this authority at CSRs extraordinary general meeting scheduled for August 30, 2011 on terms similar to the resolution passed at the 2010 annual general meeting, but
based on the issued share capital of CSR following closing of the merger.
A company may redeem or repurchase shares only if the shares are fully paid and, in the case of public companies, only out of (1) distributable profits,
or (2) the proceeds of a new issue of shares made for the purpose of the repurchase or redemption.
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The U.K. Listing Authority requires that where a company has issued shares that are admitted to the Official List of the U.K. Listing Authority and are convertible into a class of
shares to be repurchased, the holders of the convertible shares must first pass a special resolution approving any repurchase at a separate class meeting.
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The U.K. Listing Authority requires that purchases of 15% or more of any class of a companys share capital must be by way of a tender offer to all shareholders of that
class.
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Unless a tender offer is made to all holders of the class, purchases by a listed company of less than 15% of any class of its share capital pursuant to a general authority
granted by its shareholders may only be made if the price to be paid is not more than the higher of (a) 5% above the average of the middle market quotations taken from the Daily Official List of the London Stock Exchange for the five trading
days before the purchase date, and (b) that stipulated by Article 5(1) of the Buy-Back and Stabilisation Regulation, i.e. the higher of the price of the last independent trade and the highest current independent bid on the trading venues where
the purchase is carried out.
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Current Rights of Zoran
Stockholders
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Current Rights of CSR Shareholders
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Meetings of Shareholders
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Zorans bylaws provide that meetings of Zoran stockholders may be held on such date and time and at any place designated by Zorans board of directors or, if no such
designation is made, at the registered office of Zoran. Pursuant to Zorans bylaws, at the discretion of Zorans board of directors, any meeting of Zoran stockholders may be held by means of remote communication.
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Under English law, a general meeting of shareholders may be called by the board of directors. Shareholders holding at least 5% of the paid-up capital of the company carrying
voting rights at general meetings of the company may require the directors to call a general meeting of the company. The notice requirements for general meetings of the company are as follows: (1) annual general meeting: at least 21 clear days
notice; (2) any other general meeting: at least 14 clear days notice.
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General meetings may be called upon shorter notice with the agreement of (1) in the case of an annual general meeting, all the shareholders who are permitted to attend and vote,
or (2) in the case of any other general meeting, a majority of the shareholders holding at least 95% by nominal value of the shares giving the right to attend and vote at the meeting.
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Clear days notice means calendar days and excludes (1) the deemed date of receipt of the notice, and (2) the date of the meeting itself. CSRs articles of
association provide that documents sent by first class post are deemed received 24 hours after mailing, and, if not sent by first class post, 48 hours after mailing.
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Special Meetings of Shareholders
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Delaware law provides that special meetings of stockholders may be called by the board of directors, or any person or persons authorized
by the corporations certificate of incorporation or bylaws.
Zorans bylaws provide that special meetings of Zoran stockholders may be called, for any purpose or purposes, only on the order of the chairman of
the Zoran board of directors, the president, or the Zoran board of directors. Zorans bylaws provide that Zoran stockholders entitled to vote at such special meeting must receive notice of the meeting at least 10 days and not more than 60 days
prior to the meeting, with such notice specifying the place, date, hour and purpose or purposes of the meeting.
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Special resolutions generally involve proposals to change the name of the company, alter its capital structure, change or
amend the rights of shareholders, permit the company to issue new shares for cash without applying the shareholders pre-emptive rights, amend the companys objects (purpose) clause in its memorandum of association, amend the
companys articles of association, or carry out other matters where either the companys articles of association or the Companies Acts prescribe that a special resolution is required.
Other proposals relating to the ordinary course of the companys business, such
as the election of directors, would generally be the subject of an ordinary resolution.
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Current Rights of Zoran
Stockholders
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Current Rights of CSR Shareholders
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Dissenters Rights of Appraisal
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Under Delaware law, stockholders of a corporation that is a constituent in a merger generally have the right to demand and receive
payment of the fair value of their stock in lieu of receiving the merger consideration. However, appraisal rights are not available to holders of shares:
(1) listed on a U.S. national securities exchange; or
(2) held of record by
more than 2,000 stockholders; unless holders of stock are required to accept in the merger anything other than any combination of:
(1) shares of stock or depositary receipts of the surviving corporation in the
merger;
(2) shares of stock or depositary receipts of another corporation that, at the effective
date of the merger, will be either:
(a) listed on a national securities exchange; or
(b) held of record by
more than 2,000 stockholders;
(3) cash in lieu of fractional shares of the stock or depositary receipts received;
or
(4) any
combination of (1), (2) and (3).
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While English law does not generally provide for appraisal rights, a shareholder may apply to a court and the court may specify terms for the acquisition that it considers
appropriate as described under Shareholders Votes on Certain Transactions below.
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In addition, appraisal rights are not available to the holders of shares of the surviving corporation in the merger, if the merger does not require the approval of the stockholders
of that corporation.
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Pre-emptive Rights
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Under Delaware law, a stockholder is not entitled to pre-emptive rights to subscribe for additional issuances of stock or any security convertible into stock unless they are
specifically granted in the certificate of incorporation. Zorans certificate of incorporation does not provide for preemptive rights.
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Under English law, the issuance for cash of (1) equity securities, being those shares in a company which, with respect to dividends or capital, carry a right to participate
beyond a specified amount in a distribution, or (2) rights to subscribe for or convert into equity securities, must be offered first to the existing equity shareholders in proportion to the respective nominal values of their holdings, unless a
special resolution to the contrary has been passed by shareholders in a general meeting.
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One of the resolutions passed by CSR shareholders at CSRs annual general meeting held on May 18, 2011, provides the directors with a general and
unconditional authority to allot equity securities and to grant rights to subscribe for or convert any security into shares up to a nominal amount of £58,660 and, subject to certain conditions, up to a
nominal
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Current Rights of Zoran
Stockholders
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Current Rights of CSR Shareholders
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amount of £117,320 by way of a rights issue. The authority will expire on the date of the annual general meeting in 2012 or until the close of business on August 18,
2012 (whichever is the earlier), but, in each case, so that the company may make offers and enter into agreements during the relevant period which would, or might, require shares to be allotted or rights to subscribe for or convert securities into
shares to be granted after the authority ends and the Board may allot shares or grant rights to subscribe for or convert securities into shares under any such offer or agreement as if the authority had not ended.
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One of the special resolutions passed by CSR shareholders at CSRs annual general meeting held on May 18, 2011, provides the directors with an authority to allot
equity securities for cash under the authority given by the above resolution and/or to sell ordinary shares held by CSR as treasury shares for cash as if section 561 of the Companies Act 2006 did not apply to any such allotment or sale, such power
to be limited to the allotment of equity securities and sale of treasury shares for cash in connection with an offer of, or invitation to apply for, equity securities by way of a rights issue. In the case of the authority granted under the above
resolution and/or in the case of any sale of treasury shares for cash, to the allotment (otherwise than under the current resolution) of equity securities or sale of treasury shares up to a nominal amount of £8,790, such authority will
apply until CSRs annual general meeting in 2012 or until close of business on August 18, 2012 (whichever is the earlier) but in each case, during this period CSR may make offers, and enter into agreements, during the relevant period which
would, or might, require equity securities to be allotted (and treasury shares to be sold) after the authority end and the directors may allot equity securities under any such offer or agreement as if the authority had not
ended.
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Current Rights of Zoran
Stockholders
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Current Rights of CSR Shareholders
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Amendment of Governing Provisions
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Under Delaware law, unless the certificate of incorporation requires a greater vote, an amendment to the certificate of incorporation
requires the approval and recommendation of the board of directors, the affirmative vote of a majority of the outstanding stock entitled to vote on the amendment, and the affirmative vote of a majority of the outstanding stock of each class entitled
to vote on the amendment as a class. Zorans Certificate of Incorporation does not provide otherwise.
Under Delaware law, stockholders have the power to adopt, amend or repeal bylaws by the affirmative vote of a majority of the outstanding stock entitled to vote at a meeting of stockholders unless the
certificate of incorporation or the bylaws specify another percentage. Zorans Certificate of Incorporation and Bylaws specify no such higher percentage.
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Under English law, shareholders may by special resolution alter, delete, substitute, amend or add to (1) the objects or purpose clause
in a companys memorandum of association, and (2) the companys articles of association. Amendments to the objects clause of the memorandum of association are subject to the right of dissenting shareholders to apply to the courts to cancel
the amendments.
Under English law, the board of directors is not
authorized to change the memorandum of association or the articles of association. See Stock Class Rights below.
Amendments affecting the rights of the holders of any class of shares may, depending on the rights attached to the class and the nature of the amendments,
also require approval by special resolution of the classes affected in separate class meetings. See Stock Class Rights below.
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Under Delaware law, if provided by the certificate of incorporation, the board of directors has the power to adopt, amend or repeal the bylaws of a company. Zorans certificate
of incorporation authorizes Zorans board of directors to adopt, amend, repeal or otherwise alter the bylaws without any action on the part of the stockholders; provided, however, that any bylaws made by the Zoran board of directors and any and
all powers conferred by any of such bylaws may be amended, altered or repealed by Zorans stockholders.
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Preference Stock
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Zorans certificate of incorporation authorizes Zorans board of directors to provide for the issuance of one or more series of preferred stock, to issue up to 3,000,000
shares of preferred stock. Zorans board of directors is authorized to determine, alter or eliminate any or all of the rights, preferences, privileges and restrictions granted to or imposed upon any wholly unissued series of preferred stock,
and to fix, increase or decrease the number of shares comprising any such series and the designation thereof or any of them, and to provide for the rights and terms of redemption or conversion of the shares of any such series.
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CSRs articles of association provide that, subject to any rights attached to existing shares, any share may be issued with or have attached to it such rights and restrictions
as the company may by ordinary resolution decide or, if no such resolution has been passed or so far as the resolution does not make specific provision, as the CSR board of directors may decide. CSR currently has ordinary and deferred shares (which
have no rights) in issue.
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Zoran does not have any outstanding shares of preferred stock.
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Current Rights of Zoran
Stockholders
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Current Rights of CSR Shareholders
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Stock Class Rights
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Under Delaware law, any change to the rights of holders of Zoran common stock or preferred stock would require an amendment to
Zorans certificate of incorporation. Holders of shares of a class are entitled to vote as a class upon a proposed amendment to the certificate of incorporation if the amendment will increase or decrease the authorized number of shares of the
class, increase or decrease the par value of the shares of the class, or alter or change the powers, preferences or special rights of the shares of the class so as to affect them adversely.
See Also Amendment of Governing Provisions above.
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CSRs articles of association provide that, subject to the provisions of the Companies Acts:
(1) all or any rights
of any class of shares may only be varied with the consent in writing of holders of three-fourths of the total nominal value of shares of that class or by a special resolution passed at a separate class meeting of the holders of shares of that
class;
(2) the quorum required for the separate class meetings is at least two persons who hold,
or act as proxies for, at least one third of the total nominal value of the issued shares of that class, except that at any adjourned meeting one shareholder or his proxy constitutes a quorum, regardless of the number of shares that person
holds;
(3) every holder of shares of that class present in person or by proxy and entitled to
vote shall be entitled, on a poll, to one vote in respect of each share held; and
(4) a poll may be demanded at a separate class meeting by any person present in person or by proxy and entitled to vote.
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Unless otherwise expressly provided by the terms of their issue, the special rights attached to any class of shares are not deemed to be varied by the creation or issue of
further shares ranking equally with them.
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Shareholders Votes on Certain Transactions
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Generally, under Delaware law, unless the certificate of incorporation provides for the vote of a larger portion of the stock,
completion of a merger or consolidation or sale of substantially all of a corporations assets or dissolution requires the approval of the board of directors, and approval by the vote of the holders of a majority of the outstanding stock
entitled to vote on that matter. Zorans certificate of incorporation does not require a vote of a larger portion of the stock for the events described above.
See Provisions Relating to Share Acquisitions below for a discussion of Section 203 of the DGCL.
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The Companies Act 2006 provides for schemes of arrangement, which are arrangements or compromises between a company and any class of shareholders or creditors and used in certain
types of reconstructions, amalgamations, capital reorganizations or takeovers. They require (1) the approval, at special meetings convened by order of the court, of a majority in number of each class of shareholders or creditors representing 75% in
value of the capital held by the shareholders or the class of shareholders, or debt owed to the creditors or the class of creditors, present and voting either in person or by proxy, and (2) the sanction of the court.
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Once so approved and sanctioned, all shareholders and creditors of the relevant class are bound by the terms of the scheme, and a dissenting shareholder would have no rights
comparable to appraisal rights provided under Delaware law.
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Current Rights of Zoran
Stockholders
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Current Rights of CSR Shareholders
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Under the rules of the U.K. Listing Authority, shareholder approval:
(1) is usually
required for an acquisition or disposal by a listed company if, generally, the assets, profits, turnover or gross capital of the company or business to be acquired or disposed of represents 25% or more of the assets, profits, turnover or gross
capital of the listed company or if the consideration to be paid represents 25% or more of the aggregate market value of the listed companys equity shares; and (2) may also be required for an acquisition or disposal of assets between a listed
company and other parties, including:
(a) directors or shadow directors of the company or its subsidiaries; or
(b) any person who is, or was, in the last 12 months preceding the date of the transaction
a holder of 10% or more of the nominal value of any class of the companys or its holding companys or its subsidiarys shares having the right to vote in all circumstances at general meetings; or
(c) a person exerting
significant influence over the listed company; or
(d) an associate of a person described in 2(a), 2(b) or 2(c).
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The Companies Act 2006 also provides that (1) where a takeover offer (as defined therein) is made for the shares of a company incorporated in the U.K., and (2) the offeror
has, by virtue of acceptances of the offer, acquired or unconditionally contracted to acquire at least 90% in value of the shares of any class to which the offer relates representing at least 90% of the voting rights carried by those shares, the
offeror may, within three months beginning on the day after the last day on which the offer could be accepted, require shareholders who did not accept the offer to transfer their shares to the offeror on the terms of the offer. A dissenting
shareholder may object to the transfer or its proposed terms by applying to the court within six weeks of the date on which notice of the required transfer was given by the offeror.
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Current Rights of Zoran
Stockholders
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Current Rights of CSR Shareholders
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The court may, on receiving such an application, order (a) that the offeror is not entitled and bound to acquire the shares to which the notice relates, or (b) that the
terms on which the offeror is entitled and bound to acquire the shares shall be such as the court thinks fit.
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A minority shareholder is entitled, in similar circumstances, to require the offeror to acquire his shares on the terms of the offer.
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Rights of Inspection
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Delaware law allows any stockholder during normal business hours:
(1) to inspect and to
make copies or extracts of:
(a) the corporations stock ledger;
(b) a list of its
stockholders; and
(c) its other books and records;
(2) provided
that:
(a) the stockholder makes a written request under oath stating the purpose of his
inspection; and
(b) the inspection is for a purpose reasonably related to the persons interest as a
stockholder.
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The register and index of names of shareholders of an English company must be open to inspection (1) for free, by its shareholders and
(2) for a fee by any other person. In both cases, the documents may be copied for a fee.
The shareholders of an English public company may also inspect, without charge, during business hours (1) minutes of meetings of the shareholders and obtain copies of the minutes for a fee, and (2)
service contracts of the companys directors.
In addition, the
published annual accounts of a public company are required to be available for shareholders at a general meeting and a shareholder is entitled to a copy of these accounts.
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CSR shareholders do not have rights to inspect the minutes of meetings of its directors.
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The articles of association of CSR provide that no member in his capacity as such shall have any right of inspecting any accounting record or book or document of the company
except as conferred by law, ordered by a court of competent jurisdiction or authorized by the CSR board of directors or by ordinary resolution of the shareholders of the company.
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Current Rights of Zoran
Stockholders
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Current Rights of CSR Shareholders
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Standard of Conduct for Directors
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Delaware law does not contain any specific provisions setting forth the standard of conduct of a director. The scope of the fiduciary
duties of Zorans board of directors is thus determined by the courts of the State of Delaware. In general, directors have a duty to act without self-interest, on an informed basis, in good faith, and in a manner they believe to be in the best
interests of the stockholders.
Delaware law provides that a contract or
transaction in which one or more of its directors has an interest shall not be void or voidable solely because such director was present at or participated in the meeting approving such transaction if:
(i) the
material facts of such directors interest were disclosed or known to the board of directors and the board of directors authorized the transaction in good faith by the affirmative vote of a majority of disinterested directors;
(ii) the material
facts of the directors interest are disclosed or known to the stockholders and the transaction is approved in good faith by the stockholders; or
(iii) the transaction is fair as to the corporation at the time it is authorized by the board of
directors or stockholders.
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Under English law, a director has a broad statutory duty to act in the way he considers, in good faith, would be most likely to
promote the success of the company for the benefit of its members as a whole. In addition, there are specific obligations:
(1) to avoid an actual or potential conflict between his duty to the company and duties to
any other person or his own personal interests, and to declare any existing interests that may conflict with a proposed transaction or arrangement of the company;
(2) not to accept a benefit from a third party conferred by reason of his being a
director, or his doing (or not doing) anything as a director;
(3) to act bona fide in what he considers is in the interests of the company as a whole, bearing in mind a number of different matters;
(4) to exercise his
powers only in accordance with the memorandum and articles of association of the company;
(5) to exercise independent judgment; and
(6) to exercise
reasonable care, skill and diligence. This test is both subjective (i.e., was the directors conduct that of a reasonably diligent person who has the knowledge and experience of the director) and objective (i.e., was the directors conduct
that of a reasonably diligent person having the knowledge and experience that a director holding that position should have).
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CSRs articles of association provide that the CSR board of directors may in specified circumstances authorize any matter that would otherwise involve a director breaching his
duty under the Companies Acts to avoid a conflict of interest. They also provide that, subject to authorization of such conflict, a director may retain any benefit derived by reason of that interest.
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Classification of the Board of Directors
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Delaware law permits the certificate of incorporation or a stockholder adopted bylaw to provide that directors be divided into one, two or three classes, with the term of office of
one class of directors to expire each year. Zorans certificate of incorporation does not divide the Zoran board of directors into classes.
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English law permits a company to provide a director with a guaranteed term of employment as a director of that company of up to two years or, subject to approval by the members
by ordinary resolution, of more than two years. However, CSRs articles of association provide that at every annual general meeting any director who (a) has been appointed by the CSR board of directors since the last
annual
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Current Rights of Zoran
Stockholders
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Current Rights of CSR Shareholders
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general meeting, or (b) held office at the time of the
two preceding annual general meetings and did not
retire at either of them, or (c) has held office with
the
company, other than employment or executive office,
for a continuous period of nine years or more at the
date of the meeting, shall retire from office and may
offer himself for re-appointment by the members.
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Removal of Directors
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Delaware law provides that a director may be removed with or without cause by the holders of a majority in voting power of the shares
entitled to vote at an election of directors, except that members of a classified board of directors may be removed only for cause, unless the certificate of incorporation provides otherwise, and directors may not be removed in certain situations in
the case of a corporation having cumulative voting without satisfying certain stockholder approval requirements.
Under Zorans bylaws, at a special meeting of stockholders called for the purpose in the manner provided in the bylaws or by written consent of a majority of the outstanding shares, the Zoran board
of directors, or any individual director, may be removed from office, with or without cause, and a new director or directors elected by a vote of stockholders holding a majority of the outstanding shares entitled to vote at an election of
directors.
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Under the Companies Act 2006, a company may remove a director without cause by ordinary resolution, irrespective of anything in any
agreement between the director and the company, provided that 28 clear days notice of the proposed resolution to remove the director is given to the company. See Classification of the Board of Directors above.
On receipt of such a notice, the company must send a copy to the director concerned.
The director has a right to be heard on the resolution at the meeting, and may have representations in writing sent to the members of the company to whom notice of the meeting is sent.
CSRs articles of association provide that in addition to any power of removal
conferred by the Companies Acts, the company may by special resolution (i.e. a resolution approved by 75% of the votes cast) remove any director before the expiration of his period of office.
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Vacancies on the Board of Directors
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Under Delaware law, unless otherwise provided in the certificate of incorporation or the bylaws, (1) vacancies on a board of
directors, and (2) newly created directorships resulting from an increase in the number of directors may be filled by a majority of the directors in office.
Zorans bylaws provide that vacancies and newly created directorships resulting from any increase in the authorized number of Directors may be filled
by a majority of the Directors then in office, although less than a quorum, or by a sole remaining Director, and each Director so elected shall hold office for the unexpired portion of the term of the Director whose place shall be vacant and until
his successor shall have been duly elected and qualified.
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Under CSRs articles of association, the company may by ordinary resolution of shareholders appoint a person to be a
director:
(1) to fill a casual vacancy; or
(2) to become an
additional director,
subject to the requirement of the articles that there
be no less than two and no more than fifteen directors at any time.
Under
English law, a public company such as CSR must have at least two directors, at least one of whom is a natural person.
The CSR board of directors has the power, subject to the requirement that there be no more than fifteen directors at any time, to appoint a director to serve until the next annual general meeting of the
company, whereupon the director concerned is required to retire but will be eligible for re-election.
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Current Rights of Zoran
Stockholders
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Current Rights of CSR Shareholders
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Liability of Directors and Officers
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Delaware law permits a corporations certificate of incorporation to include a provision granting to a corporation the power to
exempt a director from personal liability to the corporation and its stockholders for monetary damages arising from a breach of fiduciary duty as a director. However, no provision can limit the liability of a director for:
(1) any breach of his
duty of loyalty to the corporation or its stockholders;
(2) acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law;
(3) intentional or
negligent payment of unlawful dividends or stock purchases or redemptions; or
(4) any transaction from which he derives an improper personal benefit.
Zorans certificate of incorporation provides that a director of Zoran will not be personally liable to Zoran or its stockholders for monetary
damages for breach of fiduciary duty as a director subject to the limitations set forth above.
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English law does not permit a company to exempt any director of the company from any liability arising from negligence, default, breach
of duty or breach of trust in relation to the company.
Similar provisions
apply to an auditor of a company except that, provided specific requirements are met, a company may by ordinary resolution of shareholders authorize the company to enter into a liability limitation agreement with the auditor.
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Indemnification of Directors and Officers
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Delaware law generally provides that a corporation may indemnify any officer, director, employee or agent who is made a party to any
third party suit or proceeding on account of being a director, officer, employee or agent of the corporation against expenses, including attorneys fees, judgments, fines and amounts paid in settlement actually and reasonably incurred by him in
connection with the action if the officer, director, employee or agent:
(1) acted in good faith and in a manner he reasonably believed to be in and not opposed to the best interests of the corporation; and
(2) in a criminal
proceeding, had no reasonable cause to believe his conduct was unlawful.
Delaware law permits corporations to purchase and maintain insurance for directors, officers, employees and agents against any liability asserted against
the person whether or not the corporation would have the power to indemnify the person under Delaware law.
The Zoran Amended and Restated Bylaws require Zoran to indemnify its directors and authorize Zoran to indemnify its officers to the fullest extent permitted by Delaware law.
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English law does not permit a company to indemnify:
(1) a director of the company; or
(2) any person
employed by the company as an auditor, against any liability arising from negligence, default, breach of duty or breach of trust in relation to the company, except that indemnification is allowed for liabilities associated with:
(1) defending any
proceeding involving a person other than the company or an associated company in which judgment is entered in favor of the director or auditor or the director or auditor is acquitted; or
(2) proceedings in
which the director or auditor is held liable, but the court finds that he acted honestly and reasonably and that relief should be granted.
CSRs articles of association provide that to the extent permitted by the Companies Acts, the company may indemnify any director of the company or of
any associated company against any liability and may purchase and maintain for any director of the company or of any associated company insurance against any liability. This provision applies equally to directors and former
directors.
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Current Rights of Zoran
Stockholders
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Current Rights of CSR Shareholders
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Zoran maintains directors and officers liability insurance. In addition, each of Zorans current directors and executive officers has entered into a separate
indemnification agreement with the company.
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The Companies Act 2006 permits companies to purchase and maintain insurance for directors against any liability arising from negligence, default, breach of duty or breach of
trust in relation to the company. CSR maintains directors and officers liability insurance.
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Shareholders Suits
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Under Delaware law, a stockholder may initiate a derivative action to enforce a right of a corporation if the corporation wrongfully
fails to enforce the right itself. An individual may also commence a class action suit on behalf of himself and other similarly situated stockholders to enforce an obligation owed to the stockholders directly where the requirements for maintaining a
class action under Delaware law have been met. The complaint must:
(1) state that the plaintiff was a stockholder at the time of the transaction of which the plaintiff complains or that the plaintiffs shares thereafter devolved on the
plaintiff by operation of law; and
(2) with respect to a derivative action:
(a) allege with
particularity the efforts made by the plaintiff to obtain the action the plaintiff desires from the directors; or
(b) allege with particularity that such effort would have been futile.
Additionally, the plaintiff must remain a stockholder through the duration of the
suit. The action will not be dismissed or compromised without the approval of the Delaware Court of Chancery.
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English law permits a shareholder to initiate a lawsuit on behalf of the company only in limited circumstances.
The Companies Act 2006 provides limited circumstances in which a shareholder of a
company may bring a derivative claim in respect of a cause of action vesting in the company, or seeking relief on behalf of the company. Such a claim may only be brought in respect of a cause of action arising from an actual or proposed act or
omission involving negligence, default, breach of duty or breach of trust by a director of the company. It is immaterial whether the cause of action arose before or after the person seeking to bring the claim became a shareholder of the company. A
person seeking to bring a derivative claim must first obtain the permission of the court to do so. There are specified grounds on which a court must refuse to grant permission to continue the claim, as well as specified grounds that the court must
take into consideration.
The Companies Act 2006 also permits a
shareholder to apply for a court order on the grounds that (1) the companys affairs are being or have been conducted in a manner unfairly prejudicial to the interests of all or some shareholders, including at least the shareholder making the
claim, or (2) an actual or proposed act or omission of the company (including an act or omission on its behalf) is or would be so prejudicial. This provision also applies to a person who is not a shareholder of the company but to whom shares in the
company have been transferred or transmitted by operation of law.
If the
court is satisfied that the application is well founded, it may make such order as it thinks fit for giving relief in respect of the matters complained of.
Except in these limited circumstances, English law does not generally permit class action lawsuits by shareholders on behalf of the company or on behalf
of other shareholders.
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Current Rights of Zoran
Stockholders
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Current Rights of CSR Shareholders
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Provisions Relating to Share Acquisitions
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Section 203 of the General Corporation Law of the State of Delaware prohibits business combinations, including mergers,
consolidations, sales and leases of assets, issuances of securities and similar transactions, by a corporation or a subsidiary with an interested stockholder who beneficially owns 15% or more of a corporations voting stock, for
three years after the person or entity becomes an interested stockholder, unless:
(1) prior to the time that the stockholder became an interested stockholder, the board of directors approved either the business combination or the transaction that resulted in the
stockholder becoming an interested stockholder;
(2) after completion of the transaction in which the stockholder became an interested stockholder, the interested stockholder holds at least 85% of the voting stock of the
corporation not including:
(a) shares held by directors who are also officers and
(b) shares granted
under certain employee benefit plans; or
(3) after the stockholder becomes an interested stockholder, the business combination is approved by the board of directors and the holders of at least 66
2
/
3
% of the outstanding stock, excluding shares held by the interested
stockholder.
The merger is not subject to the restrictions on
business combinations set forth in Section 203. Zorans board of directors has approved and adopted the merger and the merger agreement, and CSR is not an interested stockholder of Zoran.
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In the case of a company whose shares are listed on the Official List of the U.K. Listing Authority and traded on the London Stock
Exchange, shareholder approval must be obtained for certain acquisitions or disposals of assets involving directors or substantial shareholders or their associates.
In addition, takeovers of public companies considered to be resident in the United Kingdom, i.e., generally those whose shares are admitted to the
Official List, are regulated by the City Code on Takeovers and Mergers, which is:
(1) made up of rules derived from European legislation and the Companies Acts and given a statutory footing under the Companies Act 2006
(2) administered by
the Panel on Takeovers and Mergers, a body consisting of representatives of the City of London financial and professional institutions, which oversees the conduct of takeovers.
The City Code provides that when (1) any person acquires, whether by a series of
transactions over a period of time or not, shares which, together with shares held or acquired by persons acting in concert with him, represent 30% or more of the voting rights of a public company, or (2) any person, together with persons acting in
concert with him, holds at least 30% but not more than 50% of the voting rights and that person, or any person acting in concert with him, acquires any additional shares, the person must generally make an offer to the holders of any class of equity
share capital of the company, whether voting or non-voting, and also to the holders of any other class of voting non-equity securities of the company, for cash, or with a cash alternative, at not less than the highest price paid by the offeror or
any person acting in concert with him for any interest in shares of that class during the 12 months preceding the date of the offer.
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Current Rights of Zoran
Stockholders
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Current Rights of CSR Shareholders
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Anti-Takeover Provisions
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Under Delaware law, directors generally have a duty to act without self-interest, on an informed basis, in good faith, and in a manner
they reasonably believe to be in the best interests of the stockholders. Nevertheless, a Delaware court will generally apply a policy of judicial deference to board of director decisions to adopt anti-takeover measures in the face of a potential
takeover where the directors are able to show that:
(1) they had reasonable grounds for believing that there was a danger to corporate policy and effectiveness from an acquisition proposal; and
(2) the board of
directors action taken was neither preclusive nor coercive and was reasonable in relation to the threat posed.
Zoran does not have a rights plan applicable to its common stock.
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Under English law, directors of a company have a fiduciary duty to take only those actions that are in the interests of the company as a
whole. Generally, anti-takeover measures are not actions that fall within this category. Under the City Code, a company is prohibited from taking any action which could effectively result in the offer being frustrated or the shareholders being
denied an opportunity to decide on its merits without the approval of its shareholders at a general meeting after:
(1) a bona fide offer has been communicated to its board of directors; or
(2) its board of
directors believes that a bona fide offer is imminent.
CSR does not have
a rights plan or similar anti-takeover measure applicable to its share capital.
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Disclosure of
Interests
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Acquirors of Zoran common stock are subject to disclosure requirements under Section 13(d)(1) of the Exchange Act and Rule 13d-1 thereunder, which provide that any person
who becomes the beneficial owner of more than 5% of the outstanding shares of Zoran common stock must, within 10 days after such acquisition and subject to certain exceptions, file a Schedule 13D with the SEC disclosing specified information,
and send a copy of the Schedule 13D to Zoran and to each securities exchange on which Zoran common stock is traded. Amendments to Schedule 13D representing changes in co-ownership or intentions with respect to Zoran must be filed
promptly.
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The U.K. Disclosure and Transparency Rules provide that anyone who acquires a material interest or becomes aware that he has acquired a material interest in 3% or more of any class
of shares of a public companys issued share capital carrying rights to vote at general shareholder meetings must notify that company in writing of his interest within two days. Thereafter, any increase or decrease of a whole percentage point
and any decrease that reduces the interest to below 3% must be notified in writing to the company. This requirement applies to CSR shareholders.
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Zoran is required by the rules of the SEC to disclose in the proxy statement relating to its annual meeting of stockholders the identity
and number of shares of Zoran voting securities beneficially owned by:
(1) each of its directors;
(2) its principal executive officer;
(3) its principal
financial officer;
(4) each of its four most highly compensated executive officers other than its principal
executive officer and its principal financial officer;
(5) all of its directors and executive as a group; and
(6) any beneficial owner of 5% or more of the Zoran voting securities of which Zoran is
aware.
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In addition, the Companies Act 2006 provides that a public company may, by notice in writing, require a person whom the company knows or
reasonably believes to be or to have been within the three preceding years, interested in the companys issued voting share capital to (1) confirm whether this is or is not the case, and (2) if this is the case, to give further information that
the company requires relating to his interest or any other interest in the companys shares of which he is aware. The disclosure must be made within a reasonable period as specified in the notice.
When the notice is served by a company on a person who is or was interested in
shares of the company and that person fails to give the company any information
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Current Rights of Zoran
Stockholders
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Current Rights of CSR Shareholders
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required by the notice within the time specified in the notice, the company may apply to the court for an order directing that the
shares in question be subject to restrictions such that, among other things:
(1) any transfer of the shares is void;
(2) no voting rights are exercisable in respect of the shares;
(3) no further shares
may be issued in right of the shares or in pursuance of an offer made to their holder; and
(4) other than in a liquidation, no payment may be made of sums due from the company on
the shares, whether in respect of capital or otherwise.
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Subject to limited exceptions, any agreement to transfer shares which are subject to restriction (1) above is void.
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CSRs articles of association provide that in such a situation CSRs board of directors may impose the following
restrictions on such a shareholder who holds or is shown to hold an interest of at least 0.25% in number or nominal value of the shares: (a) the shares shall not confer on the holder any right to attend or vote either personally or by proxy at
any general meeting of the company or at any separate general meeting of the holders of any class of shares in the company or to exercise any other right conferred by membership in relation to general meetings, (b) the CSR board of directors
may withhold payment of all or any part of any dividends or other moneys payable in respect of the shares and the holder shall not be entitled to receive shares in lieu of dividend, and (c) the CSR board of directors may decline to register a
transfer of any of the shares which are certificated shares, unless such a transfer is pursuant to an arms length sale. CSRs articles further provide that in respect of an interest in shares that is less than 0.25% of the relevant class
of shares, the restrictions extend only to (a) above.
CSR is
required by the rules of the SEC to disclose in its Annual Report on Form 20-F the identity and number of shares of CSR voting securities beneficially owned by any beneficial owner of 5% or more of the CSR voting securities of which CSR is
aware.
For so long as CSR remains an SEC reporting company, CSR
shareholders that beneficially own more than 5% of the outstanding CSR ordinary shares will be required to comply with reporting requirements under the Exchange Act.
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Current Rights of Zoran
Stockholders
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Current Rights of CSR Shareholders
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CSR is required by the listing rules of the U.K. Listing Authority to disclose in its annual report the identity and share interests of its directors and any persons connected
with them, as defined in the Companies Act 2006, and of any person with an interest of 3% or more of its CSR ordinary shares.
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Persons discharging managerial responsibilities (primarily directors and some senior executives), and their connected persons, must notify a public company such as CSR in writing
of the occurrence of all transactions conducted on their own account in the shares of the company, or derivatives or any other financial instruments relating to those shares within four business days of the day on which the transaction occurred. The
notification must contain specified information, including the name of the person involved, the type of transaction, the date on which it occurred, and the price and volume of the transaction. The public company must notify a regulatory news service
(which will make the information public) of any information notified to it in accordance with these provisions. The notification to a regulatory news service must be made as soon as possible, and in any event by no later than the end of the business
day following the receipt of the information by the company.
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Limitation of Enforceability of Civil Liabilities under U.S. Federal Securities Laws, Ability to
Bring Suits, Enforce Judgments and Enforce U.S.
Law
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Zoran is a U.S. company incorporated under the laws of Delaware and has substantial assets located in the United States. As a result, investors generally can initiate lawsuits in
the United States against Zoran and its directors and officers and can enforce lawsuits based on U.S. federal securities laws in U.S. courts.
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CSR is an English company located in the United Kingdom. Many of the directors and officers of CSR are residents of the United Kingdom and not the United States. In addition,
although CSR is the sole shareholder of a U.S. subsidiary and, following completion of the merger, will have substantial assets in the United States, the majority of CSRs assets and a large portion of the assets of CSRs directors and
officers will be located outside of the United States.
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As a result, U.S. investors may find it difficult in a lawsuit based on the civil liability provisions of the U.S. federal securities laws:
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(1) to effect service within the United States upon CSR and the
directors and officers of CSR located outside the United States;
(2) to enforce in U.S. courts, or outside the United States, judgments obtained against those persons in the U.S.
courts;
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Current Rights of Zoran
Stockholders
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Current Rights of CSR Shareholders
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(3) to enforce in U.S. courts judgments obtained against those persons in courts in
jurisdictions outside the United States; and
(4) to enforce against those persons in the United Kingdom, whether in original actions or in actions for the enforcement of judgments of U.S. courts, civil liabilities based solely
upon the U.S. federal securities laws.
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Short Swing Profits
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Directors and officers of Zoran are governed by rules under the Exchange Act that may require directors and officers to forfeit to Zoran any short swing profits realized
from purchases and sales, as determined under the Exchange Act and the rules thereunder, of Zoran equity securities.
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Directors and officers of CSR are not subject to the Exchange Acts short swing profit rules because CSR is a foreign private issuer under the Exchange Act that
is not subject to these rules. However, directors of CSR are subject to applicable U.K. legislation prohibiting insider dealing and market abuse.
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In addition, the directors have to comply with the Model Code of the U.K. Listing Authority that has been adopted by CSR, which provides that the considerations taken into
account by directors when deciding whether or not to deal in shares of the company of which they are a director must not be of a short-term nature. The Model Code also places additional restrictions on trading during periods prior to announcement of
a companys results or when in the possession of inside information.
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Proxy Statements, Reports Notices and Reports to Shareholders
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Under the Exchange Act proxy rules, Zoran must comply with notice and disclosure requirements relating to the solicitation of proxies for stockholder meetings.
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As a foreign private issuer, CSR is not governed by the proxy rules under the Exchange Act.
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However, CSR is governed by the Companies Acts and the listing rules of the U.K. Listing Authority regulating notices of shareholder meetings, which generally provide that notice of
a shareholder meeting must be accompanied by (1) a shareholders circular containing an explanation of the purpose of the meeting, and (2) the recommendations of the board of directors with respect to actions to be taken. In addition, CSR sends
CSR shareholders a copy of its annual report and accounts or a summary thereof.
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In addition, under the listing rules of the U.K. Listing Authority, CSR will, depending on their size and importance, be required to send to shareholders details relating to certain
acquisitions, dispositions, takeovers, mergers and offers either made by or in respect of the company.
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Current Rights of Zoran
Stockholders
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Current Rights of CSR Shareholders
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Reporting Requirements
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As a U.S. public company and an accelerated filer under SEC rules, Zoran must file with the SEC, among other reports and
notices:
(1) an Annual Report on Form 10-K within 75 days after the end of the fiscal
year;
(2) a Quarterly Report on Form 10-Q within 40 days after the end of each fiscal
quarter; and
(3) Current Reports on Form 8-K within four business days of the occurrence of
specified or other important corporate events.
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As a foreign private issuer with securities registered under Section 12 of the Exchange Act, CSR is required to publicly file with
the SEC Annual Reports on Form 20-F within four months after the end of each fiscal year effective for fiscal years ending on or after December 15, 2011 and to furnish to the SEC reports on Form 6-K upon the occurrence of significant
corporate events reported to UK stockholders.
CSR is required to notify
the U.K. Listing Authority and/or the Registrar of Companies of:
(1) any major new developments relating to its business which are not public knowledge and may lead to a substantial movement in its share price;
(2) notifications
received by it from persons holding an interest in 3% or more of any class of the companys share capital;
(3) any changes in its board of directors;
(4) any purchase or
redemption by it of its own equity securities;
(5) interests of directors in its shares or debentures; and
(6) changes in its capital structure.
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SUMMARY OF CORPORATE GOVERNANCE STANDARDS
Zoran Stockholders before the Merger
Zoran is a reporting company under the Exchange Act and its shares are listed on The NASDAQ Global Select Market. As an SEC reporting company, Zoran is required to comply with SEC reporting disclosure
obligations and, as a result of its listing, is required to comply with the listing standards of The NASDAQ Global Select Market, including corporate governance requirements.
CSR Shareholders after the Merger
CSR
is a foreign private issuer with a class of securities registered under the Exchange Act. CSR has applied to list the CSR ADSs on The NASDAQ Stock Market under the symbol CSRE. As a result of the anticipated listing of the CSR ADSs on
The NASDAQ Stock Market, CSR will be required to comply with the listing standards of The NASDAQ Stock Market, including most of the corporate governance requirements.
CSR is subject to SEC disclosure obligations applicable to foreign private issuers, which are similar in certain respects to, but different in other respects from, the obligations to which domestic
reporting companies (such as Zoran) are subject. Among other things, CSR is required to file an annual report on Form 20-F and report only certain developments on Form 6-K, and the financial statements included in any such reports do not
need to be prepared in accordance with U.S. GAAP.
Foreign private issuers that list securities in the United States are
subject to many of the corporate governance requirements that apply to domestic issuers (such as Zoran). For example, such issuers are subject to requirements to establish independent audit committees.
CSR is a company organized under the laws of England and Wales and is admitted to the premium segment of the Official List of the U.K.
Listing Authority and to trading on the main market of the London Stock Exchange. CSR is subject to a number of different rules and recommendations which regulate its corporate governance. Broadly, they are:
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The U.K. Corporate Governance Code on Corporate Governance, which applies to companies with a Premium Listing of equity shares with the U.K. Listing
Authority regardless of whether they are incorporated in the U.K. or elsewhere. The U.K. Corporate Governance Code is published by the Financial Reporting Council, which is the U.K.s independent regulator responsible for promoting confidence
in corporate governance and reporting. The U.K. Corporate Governance Code consists of 18 Main Principles of good governance setting out standards of good practice in relation to directors (including board balance and independence,
performance evaluation and re-election), directors remuneration, accountability and audit, and relations with shareholders. Most of the Main Principles have their own set of Supporting Principles and more detailed Code Provisions which, in
most cases, amplify the Principles. Compliance with the U.K. Corporate Governance Codes provisions is not mandatory but, under the listing rules, listed companies are required to include a statement in their annual report and accounts as to
whether the company has:
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complied throughout the accounting period with the Main Principles of the U.K. Corporate Governance Code; or
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not complied throughout the accounting period with the Main Principles of the U.K. Corporate Governance Code, and if so setting out those
provisions it has not complied with and the reasons for non-compliance.
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The UK Corporate Governance Code
is supplemented by:
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the Turnbull Guidance, which is designed to assist listed companies in complying with the internal control requirements of the U.K. Corporate
Governance Code;
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U.K. Financial Reporting Council Guidance on Audit Committees (formerly known as the Smith Guidance) which provides best practice guidance on the role
and responsibilities of audit committees; and
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U.K. Financial Reporting Council Guidance on Board Effectiveness which contains guidance on the implementation of the U.K. Corporate Governance Code.
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This guidance has no formal status and companies are not required to follow it when
applying the U.K. Corporate Governance Code.
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Non-legal guidelines issued by bodies that represent institutional investors (such as the Association of British Insurers, the U.K. National
Association of Pension Funds and the U.K. Pensions & Investment Research Consultant). These guidelines apply to listed companies and in some respects go further than the U.K. Corporate Governance Code. Although the guidelines are informal,
institutional investors may oppose any corporate actions that contravene them.
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The listing rules, which include rules and guidance on listed companies continuing obligations.
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The Disclosure Rules and Transparency Rules which contain rules and guidance on listed companies obligations to disclose and control inside
information and notify share dealings by persons discharging managerial responsibilities.
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Statutes (notably the Companies Acts) which contain numerous provisions relating to the duties of directors (including to act within their powers,
promote the success of the company, exercise independent judgment and avoid conflicts of interest) and set out sanctions for breaches of those duties. A listed company must also comply with the Financial Services and Markets Act 2000, in particular
the provisions prohibiting market abuse and misleading statements and conduct, and the Criminal Justice Act 1993 pursuant to which insider dealing is a criminal offence.
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Common law rules (that is, case law relating, for example, to directors fiduciary duties).
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CSRs constitution, the memorandum which sets out the objects of the company and governs its external affairs and the articles of association
which governs the internal affairs of the company.
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The U.K. Financial Services Authoritys Code of Market Conduct which regulates the disclosure and use of inside information, and actions that
could create a false market, in each case in relation to listed company securities.
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SERVICE OF PROCESS AND ENFORCEABILITY OF CIVIL LIABILITIES
CSR is a corporation organized under the laws of England and Wales. A substantial portion of CSRs assets and most
of its directors and executive officers are located and reside, respectively, outside the United States. Because of the location of CSRs assets and board members, it may not be possible for investors to serve process within the United States
upon CSR or such persons with respect to matters arising under the United States federal securities laws or to enforce against CSR or persons located outside the United States judgments of United States courts asserted under the civil liability
provisions of the United States federal securities laws.
CSR has been advised by Slaughter and May that there is doubt
as to the enforceability in the United Kingdom, in original actions or in actions for enforcement of judgments of United States courts, of civil liabilities predicated solely upon the federal securities laws of the United States. In addition, awards
of punitive damages in actions brought in the United States or elsewhere may be unenforceable in the United Kingdom.
CSR has
appointed National Registered Agents, Inc., 875 Avenue of the Americas, Suite 501, New York, NY 10001, as its agent to receive service of process in any action against it in any state or federal court in the State of New York arising out of the
transaction described in this proxy statement/prospectus or any purchase or sale of the ordinary shares in connection with this transaction.
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STOCKHOLDERS PROPOSALS
Zoran does not intend to hold an annual meeting of its stockholders in 2011, and will hold its 2011 annual meeting only if the merger is
not completed. If Zorans 2011 annual meeting is held, stockholder proposals will be considered for inclusion in Zorans proxy statement for the meeting so long as they are provided to Zoran on a timely basis and satisfy the other
conditions set forth in applicable SEC rules. For a stockholder proposal to have been included in Zorans proxy materials for the 2011 annual meeting, the proposal must have been received at Zorans principal executive offices, 1390 Kifer
Road, Sunnyvale, California 94086, addressed to the General Counsel, not later than December 30, 2010. Stockholders who intend to present an item of business at the 2011 annual meeting (other than a proposal submitted for inclusion in
Zorans proxy statement) must have provided notice of such business no later than December 30, 2010. Such proposals must satisfy the requirements of Section 16 of Zorans Bylaws. Should a stockholder proposal be brought before
the 2011 annual meeting, regardless of whether it is included in Zorans proxy materials, Zorans management proxy holders will be authorized by Zorans proxy form to vote for or against the proposal, in their discretion, if Zoran
does not receive notice of the proposal, addressed to the General Counsel at Zorans principal executive offices, prior to the close of business on March 14, 2011.
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LEGAL MATTERS
The validity of the CSR ordinary shares underlying the CSR ADSs to be issued in the merger will be passed upon for CSR by Slaughter and
May, U.K. counsel to CSR.
Wilson Sonsini Goodrich & Rosati, Professional Corporation, Palo Alto, California, U.S.
counsel for CSR, represented CSR in connection with the merger and the preparation of this proxy statement/prospectus.
Jones
Day, Palo Alto, California, represented Zoran in connection with the merger and the preparation of this proxy statement/prospectus.
Gross, Kleinhendler, Hodak, Halevy, Greenberg & Co., Tel Aviv, Israel, represented CSR in connection with the merger and the preparation of this proxy statement/prospectus with respect to certain
Israeli law matters and will pass on certain Israeli income tax consequences of the merger for CSR.
Goldfarb, Seligman &
Co., Tel Aviv, Israel, represented Zoran in connection with the preparation of this proxy statement/prospectus with respect to certain Israeli tax law matters and will pass on certain Israeli income tax withholding consequences of the merger for
Zoran stockholders.
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EXPERTS
The consolidated financial statements of CSR plc as of December 31, 2010 and January 1, 2010 and for the periods ended
December 31, 2010, January 1, 2010 and January 2, 2009 and the effectiveness of CSRs internal control over financial reporting as of December 31, 2010 have been audited by Deloitte LLP, an independent registered public
accounting firm, as stated in their reports, incorporated by reference herein from CSRs Annual Report on Form 20-F/A for the 52 weeks ended December 31, 2010. Such financial statements have been so incorporated in reliance upon the reports of
such firm given upon their authority as experts in accounting and auditing.
The consolidated financial statements of Zoran
Corporation as of December 31, 2010 and 2009, and for each of the two years ended December 31, 2010, have been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their reports,
incorporated by reference herein from Zorans Annual Report on Form 10-K for the year ended December 31, 2010 which report (1) expresses an unqualified opinion on the financial statements and includes an explanatory paragraph referring to
the fact that in 2009 Zoran Corporation adopted new accounting guidance issued by Financial Accounting Standards Board related to business combinations and (2) expresses an unqualified opinion on the effectiveness of internal control over
financial reporting. Such financial statements have been so incorporated in reliance upon the reports of such firm given upon their authority as experts in accounting and auditing.
The consolidated financial statements of Zoran Corporation for the year ended December 31, 2008 incorporated in this proxy
statement/prospectus by reference to Zoran Corporations Annual Report on Form 10-K for the year ended December 31, 2010 have been so incorporated in reliance on the report of PricewaterhouseCoopers LLP, an independent registered public
accounting firm, given on the authority of said firm as experts in auditing and accounting.
The consolidated financial
statements of Microtune, Inc. as of December 31, 2009 and 2008, and for each of the years in the two-year period ended December 31, 2009 have been incorporated by reference herein from Zorans Current Report on Form 8-K/A, dated
February 11, 2011 in reliance upon the report of KPMG LLP, independent registered public accounting firm and upon the authority of said firm as experts in accounting and auditing.
The consolidated financial statements of SiRF Technology Holdings, Inc. at December 27, 2008 and December 31, 2007, and for the
periods ended December 27, 2008, December 31, 2007 and December 31, 2006, have been audited by Ernst & Young LLP, independent registered public accounting firm, as set forth in their report thereon and incorporated herein by
reference. Such consolidated financial statements are incorporated herein by reference in reliance upon such report given on the authority of such firm as experts in accounting and auditing.
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WHERE YOU CAN FIND MORE INFORMATION
CSR files annual reports and furnishes other reports and information with the SEC. Zoran files annual, quarterly and current reports,
proxy statements and other information with the SEC. CSR has filed a registration statement on Form F-4 to register with the SEC the offer and sale of the CSR ordinary shares underlying the CSR ADSs that Zoran stockholders will receive in the
merger. This proxy statement/prospectus is a part of the registration statement on Form F-4. This proxy statement/prospectus is a prospectus of CSR as well as a proxy statement of Zoran for its special meeting.
You may read and copy any reports, statements or other information filed by Zoran or CSR at the SECs Public Reference Room at 100 F
Street, N.E., Room 1580, Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the Public Reference Room.
You may also obtain copies of this information by mail from the Public Reference Section of the SEC, 100 F Street, N.E., Room 1580, Washington, D.C. 20549, at prescribed rates, or from
commercial document retrieval services.
The SEC maintains a website that contains reports, proxy statements and other
information, including those filed by Zoran and CSR, at www.sec.gov. You may also access the SEC filings and obtain other information about Zoran through the website maintained by Zoran, which is www.zoran.com, and information about CSR through the
website maintained by CSR, which is www.csr.com. CSR publishes annual, half-yearly and quarterly reports, copies of which can be viewed on CSRs website, www.csr.com, and on the London Stock Exchanges website, www.londonstockexchange.com.
The information contained on these websites is not incorporated by reference into this proxy statement/prospectus.
Zoran and
CSR have not authorized anyone to give any information or make any representation about the merger that is different from, or in addition to, that contained in this proxy statement/prospectus. Therefore, if anyone does give you information of this
sort, you should not rely on it. If you are in a jurisdiction where offers to exchange or sell, or solicitations of offers to exchange or purchase, the securities offered by this proxy statement/prospectus are unlawful, or if you are a person to
whom it is unlawful to direct these types of activities, then the offer presented in this proxy statement/prospectus does not extend to you. The information contained in this proxy statement/prospectus speaks only as of the date of this document
unless the information specifically indicates that another date applies.
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INCORPORATION BY REFERENCE
The SEC allows CSR and Zoran to incorporate by reference information in this proxy statement/prospectus. This means that CSR and Zoran
can disclose important information to you by referring you to another document separately filed with or furnished to the SEC.
Each document incorporated by reference is current only as of the date of such document, and the incorporation by reference of such
document is not intended to create any implication that there has been no change in the affairs or CSR, Zoran or any other company since the date of the relevant document or that the information contained in such document is current as of any time
subsequent to its date. Any statement contained in such incorporated documents is deemed to be modified or superseded for the purpose of this proxy statement/prospectus to the extent that a subsequent statement contained in another document that is
incorporated by reference at a later date modifies or supersedes that statement. Any such statement so modified or superseded will not be deemed, except as so modified or superseded, to constitute a part of this proxy statement/prospectus.
This proxy statement/prospectus incorporates by reference the documents listed below that CSR, Zoran and Microtune previously
filed with or furnished to the SEC, as well as the appendices to this proxy statement/prospectus. They contain important information about the companies and their condition, business and results.
CSR SEC Filings
(SEC File No. 000-53684; CIK No. 0001368358)
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CSRs Annual Report on Form 20-F/A for the 52 week period ended December 31, 2010.
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The description of CSR ADSs contained in CSRs registration statement on Form F-6 dated July 26, 2011.
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The description of the CSR ordinary shares contained in CSRs registration statement on Form 8-A dated June 1, 2009, as amended.
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The audited consolidated financial statements of SiRF Technology Holdings, Inc. at December 27, 2008 and December 31, 2007, and for the
financial periods ended December 27, 2008, December 31, 2007 and December 31, 2006 contained in CSRs Registration Statement on Form F-4 (Reg. No. 333-159615) dated May 29, 2009, as amended.
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CSRs Report on Form 6-K filed on May 20, 2011.
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Zoran SEC Filings
(SEC File No. 000-27246; CIK No. 0001003022)
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Zorans Annual Report on Form 10-K for the year ended December 31, 2010.
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Zorans Quarterly Report on Form 10-Q for the quarter ended March 31, 2011.
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Zorans Current Reports on Form 8-K filed on January 5, 2011, January 20, 2011, January 21, 2011, January 25, 2011, February 3, 2011, February 8,
2011, February 10, 2011, February 11, 2011, February 22, 2011, February 23, 2011, March 9, 2011, March 29, 2011, April 20, 2011, May 9, 2011, May 12, 2011, June 21, 2011 and July 26, 2011.
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The audited consolidated financial statements of Microtune as of and for the years ended December 31, 2009 and 2008 contained in Zorans
Amendment No. 1 to Current Report on Form 8-K, filed February 11, 2011.
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Microtune, Inc. SEC
Filings
(SEC File No. 000-31029-40; CIK No. 0001108058)
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The unaudited condensed consolidated financial statements of Microtune as of and for the three and nine months ended September 30, 2010 and 2009
contained in Microtunes Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2010.
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All Annual Reports on Form 20-F that CSR may file with the SEC pursuant to Sections 13(a), 13(c), or 15(d) of the Exchange Act after the date of this proxy statement/prospectus and prior to the date of
the special meeting of Zorans stockholders shall also be deemed to be incorporated by reference. CSR may also incorporate
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into this proxy statement/prospectus any Reports of Foreign Private Issuer on Form 6-K which it furnishes to the SEC after the date of this proxy statement/prospectus and prior to the date of the
special meeting of Zorans stockholders by identifying in such form that it is being incorporated by reference into this proxy statement/prospectus.
All reports filed by Zoran under Section 13(a), 13(c) or 15(d) of the Exchange Act after the date of this proxy statement/prospectus and prior to the date of the special meeting of Zorans
stockholders shall also be deemed to be incorporated by reference. To the extent that any information contained in any Current Report of Zoran on Form 8-K, or any exhibit thereto, is furnished to, rather than filed with, the SEC, such information or
exhibit is specifically not incorporated by reference into this proxy/statement prospectus.
CSR has supplied all information
contained or incorporated by reference in this proxy statement/prospectus relating to CSR and SiRF, and Zoran has supplied all information contained or incorporated by reference relating to Zoran and Microtune.
Documents incorporated by reference are available from CSR and Zoran without charge, excluding any exhibits to those documents unless the
exhibit is specifically incorporated by reference as an exhibit in this proxy statement/prospectus. You can obtain documents incorporated by reference in this proxy statement/prospectus or filed as exhibits to the registration statement of which
this proxy/statement prospectus is a part by requesting them in writing or by telephone from the appropriate company at the following addresses:
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CSR plc
Churchill House
Cambridge Business
Park
Cowley Road
Cambridge CB4
0WZ
United Kingdom
Telephone: (44)
1223 692000
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Zoran Corporation
1390
Kifer Road
Sunnyvale, California 94086
Telephone: (408) 523-6500
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Zoran stockholders requesting documents should do so by August 23, 2011 (which is five business days prior to the special meeting) in order to ensure you receive them before the special meeting. You will
not be charged for any of these documents that you request. If you request any incorporated documents from CSR or Zoran, they will be mailed to you by first-class mail, or another equally prompt means, within one business day after receipt of your
request.
This proxy statement/prospectus contains a description of the representations and warranties that each of CSR and
Zoran made to the other in the merger agreement. Representations and warranties made by CSR, Zoran and other applicable parties are also set forth in contracts and other documents (including the merger agreement) that are attached or filed as
appendices or exhibits to this proxy statement/prospectus or are incorporated by reference into this proxy statement/prospectus. These representations and warranties were made as of specific dates, may be subject to important qualifications and
limitations agreed to between the parties in connection with negotiating the terms of the merger agreement, and may have been included in the agreement for the purpose of allocating risk between the parties rather than to establish matters as facts.
These materials are included or incorporated by reference only to provide you with information regarding the terms and conditions of the agreements, and not to provide any other factual information regarding Zoran, CSR or their respective
businesses. Accordingly, the representations and warranties and other provisions of the merger agreement should not be read alone, but instead should be read only in conjunction with the other information provided elsewhere in this proxy
statement/prospectus or incorporated by reference into this proxy statement/prospectus.
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APPENDIX AAMENDED AND RESTATED AGREEMENT AND PLAN OF
MERGER
A-1
AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
This AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER, dated as of June 16, 2011 (this
Agreement
), by and among CSR plc, a company organized under the laws of England and Wales
(
Parent
), Zeiss Merger Sub, Inc., a Delaware corporation that is a direct, wholly-owned subsidiary of Parent (
Merger Sub
), and Zoran Corporation, a Delaware corporation (the
Company
) amends
and restates in its entirety that certain Agreement and Plan of Merger, dated as of February 20, 2011, by and among Parent, Merger Sub and the Company (the
Original Agreement
).
RECITALS
(a) Parent, Merger Sub and the Company desire hereby to amend and restate the Original Agreement in its entirety.
(b) The respective boards of directors of Merger Sub and the Company have approved and declared advisable, and the board of directors of Parent has approved, this Agreement, and the merger of Merger Sub
with and into the Company (the
Merger
), all upon the terms and subject to the conditions set forth in this Agreement.
(c) Subject to certain exceptions, by virtue of the Merger, all of the issued and outstanding shares of common stock, par value $0.001 per share, of the Company (the
Company Common
Stock
) will be converted into the right to receive (i) an amount of cash as described herein plus (ii) American Depositary Shares of Parent (the
ADSs
), with each ADS representing four (4) ordinary shares,
par value £0.001 per share, of Parent (the
Parent Ordinary Shares
).
(d) Concurrently with the
execution of this Agreement, and as a condition and inducement to the willingness of Parent and Merger Sub to enter into this Agreement, certain directors and executive officers of the Company are entering into voting agreements with Parent in the
form attached hereto as Exhibit A (the
Company Voting Agreements
).
(e) Concurrently with the execution of
this Agreement, and as a condition and inducement to the willingness of the Company to enter into this Agreement, certain directors and executive officers of Parent entered into voting agreements with the Company substantially in the form attached
hereto as Exhibit B (the
Parent Voting Agreements
).
Accordingly, the parties to this Agreement, intending
to be legally bound, agree as follows:
ARTICLE I
THE MERGER
Section 1.1 The Merger. Upon the terms and subject to the conditions set forth in this Agreement, and in accordance with the General Corporation Law of the State of Delaware (the
DGCL
), at the Effective Time, (i) Merger Sub shall be merged with and into the Company, (ii) the separate corporate existence of Merger Sub shall cease and the Company shall continue its corporate existence under DGCL as
the surviving corporation in the Merger (the
Surviving Corporation
), and (iii) the Surviving Corporation shall become a wholly-owned subsidiary of Parent.
A-2
Section 1.2 Closing. Subject to the satisfaction or waiver of all of the conditions to
closing contained in Article VI, the closing of the Merger (the
Closing
) shall take place (a) at the offices of Wilson Sonsini Goodrich & Rosati, 650 Page Mill Road, Palo Alto, California, at 3:00 p.m. local time as
promptly as practicable (but in no event later than the second Business Day) after the day on which the last of those conditions (other than any conditions that by their nature are to be satisfied at the Closing, but subject to the satisfaction or
waiver of such conditions at the Closing) is satisfied or waived in accordance with this Agreement or (b) at such other place and time or on such other date as Parent and the Company may agree. The date on which the Closing occurs is referred
to as the
Closing Date
.
Section 1.3 Effective Time. Upon the terms and subject to the conditions set
forth in this Agreement, promptly after the Closing on the Closing Date, Parent, Merger Sub and the Company shall cause the Merger to be consummated under DGCL by filing a certificate of merger (the
Certificate of Merger
) to be
executed, signed, acknowledged and filed with the Secretary of State of the State of Delaware as provided in Section 251 of the DGCL. The Merger shall become effective when the Certificate of Merger has been duly filed with the Secretary of
State of the State of Delaware or at such other subsequent date or time as Parent and the Company may agree and specify in the Certificate of Merger in accordance with the DGCL (the
Effective Time
).
Section 1.4 Effects of the Merger. The Merger shall have the effects set forth in Section 259 of the DGCL.
Section 1.5 Certificate of Incorporation. At the Effective Time, the certificate of incorporation of the Company in effect
immediately prior to the Effective Time shall be amended so as to read in its entirety as set forth on Exhibit C and, as so amended, shall be, from and after the Effective Time, the certificate of incorporation of the Surviving Corporation (the
Surviving Charter
), until duly amended as provided therein or by applicable Laws.
Section 1.6
Bylaws. The bylaws of Merger Sub in effect immediately prior to the Effective Time shall be, from and after the Effective Time, the bylaws of the Surviving Corporation (the
Surviving Bylaws
) until amended in accordance with
this Agreement as provided in the Surviving Charter, in the Surviving Bylaws, or by applicable Laws.
Section 1.7
Directors. The directors of Merger Sub immediately prior to the Effective Time shall be, from and after the Effective Time, the directors of the Surviving Corporation until their successors are duly elected and qualified or until their earlier
death, resignation or removal in accordance with the Surviving Charter, the Surviving Bylaws and the DGCL.
Section 1.8
Officers. The officers of Merger Sub immediately prior to the Effective Time shall be, from and after the Effective Time, the officers of the Surviving Corporation until their successors are duly elected or appointed and qualified or until
their earlier death, resignation or removal in accordance with the Surviving Charter, the Surviving Bylaws and the DGCL.
Section 1.9 Certain Definitions. For purposes of this Agreement:
(a)
2010 Company Condensed Accounts
means the Companys unaudited condensed consolidated balance
sheet at December 31, 2010 and condensed consolidated statement of operations for the year then ended, in each case as included in the draft of the Companys annual report on Form 10-K furnished to Parent on February 16, 2011.
(b)
2010 Parent Financial Statements
means the audited consolidated financial statements of
Parent and its consolidated Subsidiaries for the period ended December 31, 2010, including the notes thereto.
(c)
Affiliate
means, with respect to any Person, any other Person that directly or indirectly controls, is controlled by or is under common control with, such first Person. For the
purposes of this definition,
control
(including, with correlative meanings, the terms
controlling,
controlled by
and
under
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common control with
), as applied to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of that
Person, whether through the ownership of voting securities, by contract or otherwise.
(d)
Business
Day
means any day, other than Saturday, Sunday or a United States federal or United Kingdom bank holiday, and shall consist of the time period from 12:01 a.m. through 12:00 midnight Eastern time.
(e)
Code
means the United States Internal Revenue Code of 1986, as amended.
(f)
Company Disclosure Letter
means the disclosure letter, dated as of the date of the Original
Agreement, delivered by the Company to Parent.
(g)
Company Material Adverse Effect
means
any effect, event, change, occurrence, circumstance or development (collectively,
Effects
) which individually or in the aggregate (i) is materially adverse to the business, assets, properties, liabilities, condition
(financial or otherwise) or results of operations of the Company and its Subsidiaries, taken as a whole, or (ii) would prevent the Company from consummating the transactions contemplated by this Agreement. For the purposes of clause (i), none
of the following shall be deemed, either alone or in combination, to constitute a Company Material Adverse Effect or be taken into account in determining whether a Company Material Adverse Effect has occurred: (A) any Effects arising from the
financial, securities or capital markets or the economy to the extent that they do not disproportionately affect the Company and its Subsidiaries, taken as a whole, compared to other companies operating in the principal industries in which the
Company and its Subsidiaries operate; (B) any Effect arising from the industries in which the Company or any of its Subsidiaries operates in general to the extent that they do not disproportionately affect the Company and its Subsidiaries,
taken as a whole, compared to other companies operating in the principal industries in which the Company and its Subsidiaries operate; (C) any Effects arising from the currency markets or currency fluctuations generally; (D) any Effects
arising from the negotiation, execution, announcement or performance of this Agreement or the consummation of the transactions contemplated hereby; (E) any Effects resulting from Parents refusal or unreasonable delay in granting a request
to take or omit to take any action that the Company is not permitted to take (or is required to omit from taking) under this Agreement without having obtained the prior consent of Parent, to the extent the action or omission sought by the Company
would have avoided such Effect; (F) changes in law, rule or regulations or generally accepted accounting principles, IFRS or the interpretation thereof to the extent they do not disproportionately affect the Company and its Subsidiaries, taken
as a whole, compared to other companies operating in the principal industries in which the Company and its Subsidiaries operate; (G) any action taken at the request of, or with the consent of, Parent; (H) acts of war, sabotage or
terrorism, or any escalation or worsening of any such acts, earthquakes, hurricanes, tornadoes or other natural disasters to the extent they do not disproportionately affect the Company and its Subsidiaries, taken as a whole, compared to other
companies operating in the principal industries or locations in which the Company and its Subsidiaries operate, and any Effects arising prior to the date hereof from the March 11, 2011 earthquake in Japan and the resulting tsunami and nuclear
accident; (I) any Effect caused by the actions taken by Ramius Value & Opportunity Master Fund, LTD and its Affiliates to replace members of the Companys Board of Directors; (J) the litigation described in item 1 of
Section 3.17 of the Company Disclosure Letter or any other claim, action, suit, proceeding, liability or obligation arising out of the facts, events or occurrences underlying such litigation; (K) stockholder class action or derivative
litigation or other litigation to the extent arising from allegations of a breach of fiduciary or other common law or statutory duty (including any stockholder claims alleging any violations of state common or statutory law, state blue sky laws,
U.S. federal securities laws or the regulations promulgated thereunder) relating to the negotiation, execution, delivery or performance of this Agreement and/or the consummation or proposed consummation of any of the transactions contemplated
hereby; (L) any change in the trading prices of the Companys equity securities by itself; (M) any failure to meet any internal or public projections, forecasts or estimates of revenue or earnings or other financial or operational
measures or the issuance of revised projections that are not as optimistic as those in existence as of the date hereof and (N) any Effect arising prior to the date hereof from the April 12, 2011 announcement by Cisco Systems, Inc. to close
down its Flip video
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camcorder business;
provided
,
however
, that with respect to any change or failure described in clauses (L) and (M), any Effects that may have contributed to or caused such
change or failure may independently constitute a Company Material Adverse Effect to the extent not otherwise excluded by the definition of
Company Material Adverse Effect.
(h)
Company Option Plans
means the Companys 2005 Equity Incentive Plan, 2005 Outside Directors
Equity Plan, 2000 Nonstatutory Stock Option Plan, 2000 Nonstatutory Stock Option Plan, 2005 Equity Incentive Plan, 1993 Stock Option Plan, Oak Technology 2002 Stock Option Plan for Teralogic Group, Oak Technology 1994 Stock Option Plan, Oak
Technology 1994 Outside Directors Stock Option Plan, Microtune, Inc. 2000 Stock Plan and Microtune, Inc. 2010 Stock Plan.
(i)
Company Product
means any product or device sold or distributed by the Company or any of its Subsidiaries, or any service provided by the Company or any of its Subsidiaries to third
parties, in the five (5) year period preceding the date of the Original Agreement.
(j)
Company
Technology
means all computer software programs, including all source code and object code (
Software
), semiconductor IP cores (including Verilog files, netlists, chip layouts and floorplans, GDSII files, and mask works),
and all related documentation and databases reflecting the foregoing and all other tangible embodiments of Intellectual Property Rights in Company Products.
(k)
Conversion Rate
means the number of British pounds sterling that would be exchanged for one U.S. dollar at 4:00 p.m. Eastern time on the trading day immediately prior to the day on
which the Effective Time occurs, as reported by Bloomberg.
(l)
Contracts
means any
contracts, agreements, licenses, notes, bonds, mortgages, indentures, commitments, leases or other instruments or obligations.
(m)
Hazardous Substances
means: (i) any chemical, emission or substance that is listed, classified or regulated as toxic, hazardous, a pollutant or contaminant, or otherwise
injurious or detrimental under any Environmental Laws; (ii) any petroleum product or by-product, asbestos-containing material, lead-containing paint, polychlorinated biphenyls, radioactive material or radon; or (iii) any other substance
that is or would reasonably be expected to become the subject of regulatory action under any Environmental Laws.
(n)
Intellectual Property Rights
means all rights arising under or associated with any of the
following, as they exist anywhere in the world: (i) patents, patent applications and similar rights in inventions and designs (
Patents
); (ii) trademarks, service marks, trade dress, trade names, brand names, designs,
logos, or corporate names, whether registered or unregistered (
Trademarks
); (iii) copyrights and mask works and other rights in work of authorship, data bases or data collections (
Copyrights
);
(iv) trade secrets, and similar rights in confidential know-how and information (
Trade Secrets
); (v) rights in domain names, Internet addresses and other computer identifiers, web sites, web pages and similar rights and
items (
Internet Assets
); (vi) all applications, registrations and filings for any of the foregoing that have been registered, filed, certified or otherwise perfected or recorded with or by any state, government or other
public or quasi-public legal authority (
IP Registrations
); and (vii) all equivalent or similar rights in or to any of the foregoing.
(o)
Irrecoverable VAT
means, in relation to any person, any amount in respect of VAT which that person (or a member of the same VAT Group as that person) has incurred and in respect of
which neither that person nor any other member of the same VAT Group as that person is entitled to a refund (by way of credit or repayment) from any relevant Tax authority pursuant to and determined in accordance with any relevant VAT legislation in
the UK or the US.
(p)
Israeli Benefit Plan
means each Company Employee Plan established,
maintained, contributed to or required to be established, maintained or contributed to by the Company or its Israeli Sub pursuant to which any current or former employee, director or individual independent contractor of the Company or its Israeli
Sub who is resident in Israel has any current or future right to benefits, including, without limitation, Managers Insurance (
Bituach Menahalim
) or other provident or pension funds which are not
government-
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mandated but were set up by the Company or its Israeli Subsidiary, whether or not satisfying Companys legal obligation to pay statutory severance pay under the Israeli Severance Pay Law,
5723-1963.
(q)
Israeli Sub
means Zoran Microelectronics Ltd, a corporation formed under the
laws of Israel.
(r)
Knowledge
means, when used with respect to (i) Parent, the
knowledge of the persons listed on Section 1.1(o) of the Parent Disclosure Letter and (ii) the Company, the knowledge of the persons listed on Section 1.1(q) of the Company Disclosure Letter, in each case after due inquiry.
(s)
Laws
means any laws, statutes, directives, ordinances, rules, regulations, codes or
executive orders enacted, issued, adopted, promulgated or applied by any Governmental Entity (including the Listing Rules, the Disclosure and Transparency Rules and the Prospectus Rules of the UKLA, and the UK Corporate Governance Code).
(t)
Legal Actions
means legal actions, claims, demands, arbitrations, charges, complaints, indictments,
litigations, suits or other civil, criminal, administrative or investigative proceedings.
(u)
Liens
means any liens, pledges, security interests, claims, options, rights of first offer or refusal, charges or other encumbrances.
(v)
Option ADS Exchange Ratio
means the sum of (x) the Exchange Ratio plus (y) the quotient obtained by dividing (1) the product of (A) the Cash Consideration
multiplied by (B) the Conversion Rate, by (2) the product of four multiplied by the volume-weighted average price for a Parent Ordinary Share, rounded to the nearest one-tenth of a pence, as reported on the London Stock Exchanges
main market for listed securities for the trading day immediately prior to the day on which the Effective Time occurs.
(w)
Option Ordinary Shares Exchange Ratio
means the sum of (x) the product of four multiplied by the Exchange Ratio plus (y) the quotient obtained by dividing (1) the
product of (A) the Cash Consideration multiplied by (B) the Conversion Rate, by (2) the volume-weighted average price for a Parent Ordinary Share, rounded to the nearest one-tenth of a pence, as reported on the London Stock
Exchanges main market for listed securities for the trading day immediately prior to the day on which the Effective Time occurs.
(x)
Open Source Materials
means all Software that is distributed under an open source, copyleft or freeware license (an
Open Source
License
) including the GNU General Public License (GPL), GNU Lesser General Public License (LGPL) or Mozilla Public License (MPL), or that is made publicly available in source code form without a requirement for payment and imposes an
obligation on any user to publish the users proprietary source code, limits the users ability to receive compensation for sublicensing the users proprietary source code, or requires the user to license its proprietary source code
for the purpose of making derivative works.
(y)
Orders
means any orders, judgments,
injunctions, awards, decrees or writs handed down, adopted or imposed by any Governmental Entity.
(z)
Parent Disclosure Letter
means the disclosure letter, dated as of the date of the Original Agreement, delivered by Parent to the Company.
(aa)
Parent Material Adverse Effect
means any Effect which individually or in the aggregate (i) is materially adverse to the business, assets, properties, liabilities, condition
(financial or otherwise) or results of operations of Parent and its Subsidiaries, taken as a whole, or (ii) would prevent Parent from consummating the transactions contemplated by this Agreement. For the purposes of clause (i), none of the
following shall be deemed, either alone or in combination, to constitute a Parent Material Adverse Effect or be taken into account in determining whether a Parent Material Adverse Effect has occurred: (A) any Effects arising from the financial,
securities or capital markets or the economy to the extent that they do not disproportionately affect Parent and its Subsidiaries, taken as a whole, compared to other companies operating in the principal industries in which Parent and its
Subsidiaries operate; (B) any Effect arising from the industries in which in which Parent or any of its Subsidiaries operates in general to the extent that they
A-6
do not disproportionately affect Parent and its Subsidiaries, taken as a whole, compared to other companies operating in the principal industries in which Parent and its Subsidiaries operate;
(C) any Effects arising from the currency markets or currency fluctuations generally; (D) any Effects arising from the negotiation, execution, announcement or performance of this Agreement or the consummation of the transactions
contemplated hereby; (E) any Effects resulting from the Companys refusal or unreasonable delay in granting a request to take or omit to take any action Parent is not permitted to take (or is required to omit from taking) under this
Agreement without having obtained the prior consent of the Company, to the extent the action or omission sought by Parent would have avoided such Effect; (F) changes in law, rule or regulations or generally accepted accounting principles, IFRS
or the interpretation thereof to the extent they do not disproportionately affect Parent and its Subsidiaries, taken as a whole, compared to other companies operating in the principal industries in which the Company and its Subsidiaries operate;
(G) any action taken at the request of, or with the consent of, the Company; (H) acts of war, sabotage or terrorism, or any escalation or worsening of any such acts, earthquakes, hurricanes, tornadoes or other natural disasters to the
extent they do not disproportionately affect Parent and its Subsidiaries, taken as a whole, compared to other companies operating in the principal industries or locations in which Parent and its Subsidiaries operate, and any Effects arising prior to
the date hereof from the March 11, 2011 earthquake in Japan and the resulting tsunami and nuclear accident; (I) stockholder class action or derivative litigation or other litigation to the extent arising from allegations of a breach of
fiduciary or other common law or statutory duty (including any stockholder claims alleging any violations of state common or statutory law, state blue sky laws, U.S. federal securities laws or the regulations promulgated thereunder) relating to the
negotiation, execution, delivery or performance of this Agreement and/or the consummation or proposed consummation of any of the transactions contemplated hereby; (J) any change in the trading prices of Parents equity securities by
itself; and (K) any failure to meet any internal or public projections, forecasts or estimates of revenue or earnings or other financial or operational measures or the issuance of revised projections that are not as optimistic as those in
existence as of the date hereof;
provided
,
however
, that with respect to any change or failure described in clauses (J) and (K), any Effects that may have contributed to or caused such change or failure may independently
constitute a Parent Material Adverse Effect to the extent not otherwise excluded by the definition of
Parent Material Adverse Effect.
(bb)
Parent Product
means any product or device sold or distributed by Parent or any of its Subsidiaries, or any service provided by Parent or any of its Subsidiaries, in the five
(5) year period preceding the date of the Original Agreement.
(cc)
Parent Technology
means all computer software programs, including all Software, semiconductor IP cores (including Verilog files, netlists, chip layouts and floorplans, GDSII files, and mask works), and all related documentation and databases reflecting the foregoing
and all other tangible embodiments of Intellectual Property Rights in Parent Products.
(dd)
Person
means any individual, corporation, limited or general partnership, limited liability company, limited liability partnership, trust, association, joint venture, Governmental Entity and other entity and group (which term
shall include a
group
as such term is defined in Section 13(d)(3) of the Exchange Act).
(ee)
Representatives
means, when used with respect to Parent or the Company, the directors, officers,
employees, consultants, accountants, legal counsel, investment bankers, agents and other representatives of Parent or the Company, as applicable, and its Subsidiaries.
(ff)
Significant Subsidiary
means, when used with respect to any Person, a Subsidiary of another Person
as such term is defined in Rule 1-02(w) under Regulation S-X promulgated by the SEC pursuant to the Exchange Act).
(gg)
Subsidiary
means, when used with respect to Parent or the Company, any other Person that Parent or the Company, as applicable, directly or indirectly owns or has the power to vote
or control 50% or more of any class or series of capital stock of such Person.
A-7
(hh)
Superior Proposal
means, with respect to Parent or
the Company, as applicable, any
bona fide
written Takeover Proposal for such party that, if consummated, would result in a person acting in concert (as defined in the City Code on Takeovers and Mergers) or group
(within the meaning of Section 13(d)(3) of the Exchange Act) owning, directly or indirectly, more than 80% of the common stock or ordinary shares, as applicable, of such party then outstanding (or of the ordinary shares or shares of the common
stock, as applicable, of the surviving entity in a merger or the ultimate parent of the surviving entity in a merger) or more than 80% of the assets of such party and its Subsidiaries and which the board of directors of such party determines in good
faith (after consultation with its legal counsel and the Company Financial Advisor or Parent Financial Advisor, as the case may be) to be more favorable to the stockholders, taken as a whole, of such party from a financial point of view than the
transactions contemplated by this Agreement, taking into consideration the conditions to the consummation of such Takeover Proposal and the financial, legal, regulatory and other aspects of such Takeover Proposal.
(ii)
Takeover Proposal
means, with respect to Parent or the Company, as applicable, any indication of
interest, proposal or offer from any person relating to (i) a direct or indirect acquisition, in one transaction or a series of related transactions, of assets (including equity securities of any Subsidiary of such party) or businesses of such
party or its Subsidiaries that generate or constitute, individually or in the aggregate, 20% or more of the consolidated net revenues, net income or assets (as of and for the year ended December 31, 2010) of such party and its Subsidiaries,
taken as a whole, (ii) the issuance to any person, persons acting in concert (as defined in the City Code on Takeovers and Mergers) or group (within the meaning of Section 13(d)(3) of the Exchange Act) of 20% or
more of any class of equity capital of such party, (iii) any tender or exchange offer that, if consummated, would result in any person, persons acting in concert or group beneficially owning 20% or more of any class of equity capital of such
party or (iv) any merger, consolidation, business combination, share exchange or similar transaction, including in the case of Parent any offer as defined in the City Code on Takeovers and Mergers, in one transaction or a series of
related transactions, involving such party or any of its Significant Subsidiaries that would result in any persons, persons acting in concert or groups (including the shareholders of a person party to such transaction) beneficially owning 20% or
more of any class of equity capital of such party, the surviving company or the resulting parent company of such party in such transaction, in each case other than the transaction contemplated by this Agreement;
provided
,
however
, that
for purposes of references to Takeover Proposal in Section 7.5, the references in this definition to 20% shall be replaced by 50%.
(jj)
Tax
or
Taxes
means (i) any and all federal, state, provincial, local and
other taxes, levies, fees, imposts, duties, and similar governmental charges (including any interest, fines, assessments, penalties or additions to tax imposed in connection therewith or with respect thereto), in the United States, the United
Kingdom, Israel or otherwise, including (x) taxes imposed on, or measured by, income, franchise, profits or gross receipts, and (y) ad valorem, value added, capital gains, sales, goods and services, use, real or personal property, capital
stock, license, branch, payroll, estimated withholding, employment, social security (or similar), national insurance, unemployment, compensation, utility, severance, production, excise, stamp, occupation, premium, windfall profits, transfer and
gains taxes, and customs duties, and (ii) any transferee liability in respect of any items described in the foregoing clause (i).
(kk)
Tax Returns
means any and all reports, returns, declarations, claims for refund, elections, disclosures, estimates, information reports or returns or statements required to be
supplied to a taxing authority in connection with Taxes, including any schedule or attachment thereto or amendment thereof.
(ll)
Treasury Regulations
means the Treasury regulations promulgated under the Code.
(mm)
Trustee
means the trustee appointed by the Israeli Sub in accordance with the provisions of the ITO and approved by the ITA, with respect to securities granted or issued under
Section 102 of the ITO, which is currently Tamir Fishman Trusts 2004 Ltd., and any replacement trustee in accordance with the terms of this Agreement and the Company Stock Plans.
(nn)
U.S. GAAP
means generally accepted accounting principles in the United States.
A-8
(oo)
VAT
means (a) within the European Union, any
Tax imposed by any member state in conformity with the Directive of the Council of the European Union on the common system of value added tax (2006/112/EC) and (b) outside the European Union, any Tax corresponding to or substantially
similar to, the common system of value added tax referred to in paragraph (a) of this definition.
(pp)
VAT Group
means a group of bodies corporate for the purposes of UK or US VAT.
ARTICLE II
EFFECT OF THE MERGER ON CAPITAL STOCK;
EXCHANGE OF CERTIFICATES
Section 2.1 Conversion of Capital Stock. At
the Effective Time, by virtue of the Merger and without any action on the part of Parent, Merger Sub, the Company or the holder of any shares of capital stock of Merger Sub or the Company:
(a)
Conversion of Merger Sub Capital Stock
. Each share of common stock, par value $0.001 per share, of Merger Sub
issued and outstanding immediately prior to the Effective Time shall be converted into and become one fully paid and non-assessable share of common stock, par value $0.001 per share, of the Surviving Corporation;
(b)
Cancellation of Treasury Stock and Parent-Owned Stock
. Each share of Company Common Stock owned by the Company
or by Parent or any of their respective wholly-owned Subsidiaries immediately prior to the Effective Time (collectively, the
Cancelled Shares
) shall be cancelled automatically and shall cease to exist, and no Cash Consideration,
ADSs, Parent Ordinary Shares or other consideration shall be paid in exchange for those Cancelled Shares; and
(c)
Conversion of Company Common Stock
.
(i) Each share of Company Common Stock issued and outstanding immediately prior to the Effective Time (other than
Cancelled Shares and Dissenting Company Shares, if any) shall be converted into the right to receive a combination of (A) $6.26 in cash in United States dollars, without interest (the
Cash Consideration
), plus
(B) 0.14725 ADSs (the
Exchange Ratio
, which, for the avoidance of doubt, may also be expressed as 0.589 Parent Ordinary Shares per share of Company Common Stock), with each whole ADS representing four (4) Parent Ordinary
Shares, subject to (I) the anti-dilution adjustments provided in Section 2.2 and (II) the payment of cash in lieu of fractional ADSs as provided in Section 2.3(f), and (x) such ADSs and Parent Ordinary Shares underlying such
ADSs, when issued, shall be free from all Liens and (y) from and as of the Effective Time, such ADSs and the Parent Ordinary Shares underlying such ADSs shall rank pari passu in all respects with the ADSs and Parent Ordinary Shares,
respectively, then outstanding; and
(ii) All shares of Company Common Stock that have been converted into the
right to receive the Cash Consideration and ADSs as provided in Section 2.1(c)(i) shall be cancelled automatically and shall cease to exist, and the holders of (x) shares of Company Common Stock which immediately prior to the Effective
Time were represented by certificates (
Company Certificates
) or (y) non-certificated shares of Company Common Stock which immediately prior to the Effective Time were represented by book entry (
Book Entry
Shares
) shall cease to have any rights with respect to those shares, other than the right to receive the Cash Consideration plus ADSs and cash in lieu of fractional ADSs as provided in this Section 2.1 and Section 2.3 upon
surrender of Company Certificates, if any, in accordance with this Article II, including Section 2.3(c) (collectively, the
Merger Consideration
).
Section 2.2 Adjustments to Prevent Dilution. If, prior to the Effective Time, Parent changes the number of Parent Ordinary Shares outstanding as a result of share dividends or other distributions
payable in Parent Ordinary Shares or ADSs or securities convertible or exchangeable into or exercisable for Parent Ordinary Shares
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or ADSs or a share or stock split (including a reverse share or stock split), reclassification, combination or other similar change with respect to the Parent Ordinary Shares or ADSs, then the
Exchange Ratio shall be equitably adjusted to eliminate the effects of that share or stock dividend, distribution, share or stock split, reclassification, combination or other change. If, prior to the Effective Time, the Company changes the number
of shares of Company Common Stock outstanding as a result of share dividends or other distributions payable in shares of Company Common Stock or securities convertible or exchangeable into or exercisable for shares of Company Common Stock or a share
or stock split (including a reverse share or stock split), reclassification, combination or other similar change with respect to the shares of Company Common Stock, then the Cash Consideration and the Exchange Ratio shall be equitably adjusted to
eliminate the effects of that share or stock dividend, distribution, share or stock split, reclassification, combination or other change.
Section 2.3 Exchange of Certificates.
(a)
Exchange Agent
.
Prior to the Effective Time, Parent shall (i) select a bank or trust company, satisfactory to the Company in its reasonable discretion, to act as the exchange agent in the Merger (the
Exchange Agent
) and (ii) enter into
an exchange agent agreement with the Exchange Agent, the terms and conditions of which are satisfactory to the Company in its reasonable discretion (the
Exchange Agent Agreement
).
(b)
Exchange Fund
. Promptly after the Effective Time, Parent shall (i) deposit, or cause to be deposited with
the Depositary Bank, or any successor depositary thereto, a number of Parent Ordinary Shares equal to the product of (x) the aggregate number of ADSs to be issued as Merger Consideration and (y) four (4); and (ii) deposit, or cause to
be deposited, with the Exchange Agent (x) cash in United States dollars in an amount sufficient to pay the aggregate amount of Cash Consideration and (y) the receipts representing such aggregate number of ADSs, and the Depositary Bank
shall be authorized to issue the ADSs representing such Parent Ordinary Shares in accordance with this Agreement. Such cash and receipts described in clauses (i) and (ii) above, together with (A) any cash in lieu of fractional ADSs to
which holders of Company Certificates may be entitled under Section 2.3(f) and (B) any dividends or other distributions paid with respect to those shares and to which the holders of Company Certificates may be entitled under
Section 2.3(d), are collectively referred to as the
Exchange Fund
.
(c)
Exchange
Procedures
.
(i)
Letter of Transmittal
. Promptly after the Effective Time, and in any event within
10 Business Days thereof, Parent shall cause the Exchange Agent to mail to each holder of record (as of immediately prior to the Effective Time) of a Company Certificate or Book Entry Shares, (1) a letter of transmittal in customary form,
specifying that delivery shall be effected, and risk of loss and title to the Company Certificates or Book Entry Shares shall pass, only upon proper delivery of Company Certificates or Book Entry Shares to the Exchange Agent or receipt in respect of
Book Entry Shares of an agents message by the Exchange Agent (or such other evidence, if any, of transfer as the Exchange Agent may reasonably request), (2) instructions for surrendering Company Certificates or Book Entry
Shares for the Merger Consideration in respect of the shares of Company Common Stock represented thereby, and (3) any form, declaration or certificate required under the General Ruling.
(ii)
Surrender of Company Certificates or Book Entry Shares
. Upon (A) surrender of a Company Certificate for
cancellation to the Exchange Agent, together with a duly executed letter of transmittal or (B) transfer of Book-Entry Shares, the holder of that Company Certificate or Book Entry Share shall be entitled to receive in exchange therefor
(1) the cash amounts and the number of whole ADSs to which such holder is entitled pursuant to Section 2.1(c), (2) the cash payable in lieu of fractional ADSs such holder is entitled to receive pursuant to Section 2.3(f), and
(3) any dividends or distributions to which such holder is entitled pursuant to Section 2.3(d), in each case less any required withholding of Taxes, and in each case which Parent shall issue and/or shall cause the Depositary Bank and the
Exchange Agent to issue (or, if applicable, transfer the legal title to, for no consideration) and/or pay in accordance with the Exchange Agent Agreement, and Parents register of members shall be updated accordingly. The ADSs shall be accepted
into The Depository Trust Company and issued in
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uncertificated book-entry form to such account as shall be specified in the completed letter of transmittal, unless a physical American depositary receipt is requested or is otherwise required by
applicable Laws, in which case Parent shall cause the Exchange Agent to send such receipt representing ADSs to such holder promptly in accordance with the Exchange Agent Agreement. Any Company Certificates so surrendered shall be cancelled
immediately. No interest shall accrue or be paid on any amount payable upon surrender of Company Certificates.
(iii)
Unregistered Transferees
. In the event of a transfer of ownership of Company Common Stock which is not
registered in the transfer records of the Company, then the Merger Consideration may be issued and/or paid in accordance with this Section 2.3(c) to a person other than the person in whose name the Company Certificate so surrendered is
registered if (A) such Company Certificate is properly endorsed or otherwise in proper form for transfer and (B) the person requesting such payment (1) pays any transfer or other Taxes required by reason of the transfer or
(2) establishes to the reasonable satisfaction of Parent and the Exchange Agent that such Taxes have been paid or are not applicable.
(iv)
No Other Rights
. Until surrendered in accordance with this Section 2.3(c), each Company Certificate and Book Entry Share shall be deemed, from and after the Effective Time, to represent
only the right to receive the aggregate Merger Consideration payable in respect of the shares represented by such Company Certificate or Book Entry Share. The Merger Consideration issued or paid upon the surrender of any Company Certificate or Book
Entry Share will be deemed to have been issued or paid in full satisfaction of all rights pertaining to that (A) Company Certificate and the shares of Company Common Stock formerly represented by it or (B) Book Entry Share.
(v)
102 Common Stock
. Notwithstanding the foregoing, any cash amounts to which such holder is entitled pursuant to
Section 2.1 and any ADSs issuable pursuant to Section 2.1 (and any cash paid with respect to fractional ADSs pursuant to Section 2.3(f)) in respect of Company Common Stock acquired upon the exercise of Company Stock Options granted
under Section 102 of the Israeli Income Tax Ordinance [New Version], 1961, as amended, and all rules and regulations promulgated thereunder (
ITO
), shall be delivered by the Exchange Agent to the Trustee promptly after the
Effective Time in accordance with the Israeli Option Tax Ruling, if obtained, and held in trust by the Trustee pursuant to the applicable provisions of Section 102 and the Israeli Options Tax Ruling, if obtained. Such cash and ADSs shall be
released by the Trustee in accordance with the terms and conditions of Section 102 of the ITO, the Option Tax Ruling, if obtained, the trust documents governing the trust held by the Trustee, and the other terms and conditions otherwise set
forth herein with respect to stockholders of the Company.
(d)
Distributions with Respect to Unexchanged
Shares
. No dividends or other distributions payable with respect to ADSs that have a record date after the Effective Time shall be paid to a holder of (i) an unsurrendered Company Certificate until that Company Certificate is properly
surrendered or (ii) a Book Entry Share that is not transferred, in each case in accordance with this Article II. Subject to applicable Laws, following the proper surrender of any such Company Certificate or Book Entry Share, there shall be
issued or paid to such holder of ADSs issuable in exchange therefor, without interest, (x) at the time of such surrender, the dividends or other distributions payable (if any) with respect to such ADSs or the underlying Parent Ordinary Shares
that have a record date after the Effective Time and a payment date on or prior to the date of issuance of such ADSs and (y) at the appropriate payment date, the dividends or other distributions payable with respect to such ADSs that have a
record date after the Effective Time and a payment date after the date of issuance of such ADSs.
(e)
No
Further Transfers
. At the Effective Time, the stock transfer books of the Company shall be closed and there shall be no further registration of transfers of the shares of Company Common Stock that were outstanding immediately prior to the
Effective Time.
(f)
Fractional Shares
.
(i) No certificates, receipts or scrip representing fractional ADSs shall be issued upon the surrender of Company
Certificates or transfer of Book Entry Shares, and such fractional ADS interests
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will not entitle their owners to vote, to receive dividends or other distributions or to any other rights of a shareholder of Parent. Each holder of Company Certificates or Book Entry Shares who
would otherwise have been entitled to receive a fraction of an ADS under this Article II (after taking into account all Company Certificates delivered by such holder) shall receive from the Exchange Agent, in accordance with the provisions of this
Article II, a cash payment in United States dollars in lieu of such fractional share interest either (A) representing that holders proportionate interest in the net proceeds from the sale by the Exchange Agent in one or more transactions
of the aggregate of the fractional ADSs which would otherwise have been issued under this Article II (the
Excess ADSs
) or (B) in accordance with Section 2.3(f)(ii). The sale of the Excess ADSs shall be (A) executed
on The NASDAQ Stock Market and (B) made at such times, in such manner and on such terms as the Exchange Agent shall determine in its reasonable discretion. Until the net proceeds of such sale or sales have been distributed to the holders of
Company Certificates in accordance with this Section 2.3, the Exchange Agent shall hold the net proceeds in trust (the
Exchange Trust
) for those holders. All commissions, fees, transfer taxes and other out-of-pocket
transaction costs, including the expenses and compensation of the Exchange Agent, incurred in connection with the sale of the Excess ADSs shall be paid by Parent and the Surviving Corporation. As soon as practicable after the determination of the
amount of cash to be paid to holders of Company Certificates and Book Entry Shares in lieu of fractional ADSs, the Exchange Agent shall make that amount available to those holders, without interest. The Exchange Agent shall determine the portion of
the net proceeds to which each holder of Company Certificates or Book Entry Shares shall be entitled by multiplying the aggregate amount of the net proceeds by a fraction of which (1) the numerator is the amount of the fractional share interest
to which such holder of Company Certificates or Book Entry Shares is entitled (after taking into account all Company Certificates delivered by such holder) and (2) the denominator is the aggregate amount of fractional share interests to which
all holders of Company Certificates and Book Entry Shares are entitled.
(ii) Notwithstanding the provisions of
Section 2.3(f)(i), Parent may elect, at its option exercised prior to the Effective Time, to pay to the Exchange Agent an amount in cash in United States dollars, to be deposited on the first Business Day following the Effective Time,
sufficient for the Exchange Agent to pay each holder of Company Certificates or Book Entry Shares an amount in cash equal to the product obtained by multiplying (A) the fraction of an ADS to which such holder would otherwise have been entitled
by (B) the closing price for an ADS on The NASDAQ Stock Market on the first Business Day immediately following the Effective Time. In such event, all references in this Agreement to the net proceeds from the sale of the Excess ADSs and similar
references shall be deemed to refer to the payments calculated in the manner set forth in this Section 2.3(f)(ii).
(g)
Required Withholding
. Parent, the Company, the Surviving Corporation and the Exchange Agent shall be entitled to deduct and withhold from any payments or consideration made pursuant to this
Agreement such amounts of the Cash Consideration or such number of ADSs as they may be required to deduct and withhold from such payment of Cash Consideration and ADSs under any applicable Tax Laws, including the ITO (it being agreed that Parent,
the Surviving Corporation and the Exchange Agent shall be permitted to satisfy any Tax withholding requirement with respect to the Merger Consideration by deducting and withholding the appropriate cash amount from the Cash Consideration);
provided
,
however
, that if Parent, the Exchange Agent or the Surviving Corporation are provided at least three (3) Business Days prior to any payment payable pursuant to this Agreement with what Parent, the Exchange Agent or the
Surviving Corporation determines in their reasonable discretion to be a valid approval or ruling issued by the ITA (including the Tax Rulings) regarding the deduction or withholding of tax (including the reduction of tax to be withheld, an exemption
from withholding or any other instructions regarding the payment of withholding) (the
Israeli Tax Certificate
) from any consideration payable to such payee hereunder, then the withholding (if any) of any amounts under the ITO,
from the consideration payable to such payee hereunder, and the payment of the consideration or any portion thereof, shall be made only in accordance with the provisions of such Israeli Tax Certificate. If Parent, the Company, the Surviving
Corporation or the Exchange Agent, as the case may be, deducts or withholds any such amounts, such amounts shall be treated
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for all purposes as having been paid to the Person in respect of whom Parent, the Company, the Surviving Corporation or the Exchange Agent, as the case may be, made such deduction and
withholding.
(h)
Termination of Exchange Fund and Exchange Trust
. Any portion of the Exchange Fund or
the Exchange Trust that remains unclaimed by the holders of Company Certificates one year after the Effective Time shall be delivered by the Exchange Agent to Parent upon demand. Any holder of Company Certificates who has not complied with this
Article II shall look thereafter only to Parent for payment of the Merger Consideration.
(i)
No
Liability
. None of Parent, the Surviving Corporation or the Exchange Agent shall be liable to any holder of Company Certificates for any Merger Consideration properly delivered to a public official under any applicable abandoned property,
escheat or similar Laws.
(j)
Lost, Stolen or Destroyed Certificates
. If any Company Certificate is
lost, stolen or destroyed, upon the making of an affidavit of that fact by the Person claiming such Company Certificate to be lost, stolen or destroyed, the Exchange Agent shall issue the Merger Consideration in exchange for such lost, stolen or
destroyed Company Certificate.
Section 2.4 Treatment of Stock Options, RSUs and ESPP.
(a) As of the Effective Time, each option to acquire shares of Company Common Stock outstanding immediately prior to the
Effective Time (Company Stock Options) and issued under any Company Option Plans (as defined below), shall be assumed and converted (as converted, a Converted Stock Option), by virtue of the Merger and without any
action on the part of the holder of that Company Stock Option, into an option exercisable for, at the election of Parent, (i) that number of ADSs equal to the product of (A) the aggregate number of shares of Company Common Stock for which
such Company Stock Option was exercisable multiplied by (B) the Option ADS Exchange Ratio, rounded down to the nearest whole share, or (ii) that number of Parent Ordinary Shares equal to the product of (A) the aggregate number of
shares of Company Common Stock for which such Company Stock Option was exercisable multiplied by (B) the Option Ordinary Shares Exchange Ratio, rounded down to the nearest whole share, provided that all Converted Stock Options held by persons
who are not residents of Europe or India shall be exercisable for ADSs unless otherwise agreed by Parent and the Company. The exercise price per share of such Converted Stock Option shall be equal to (x) in the case of Converted Stock Options
exercisable for ADSs, (1) the per share exercise price of such Company Stock Option immediately prior to the Effective Time divided by (2) the Option ADS Exchange Ratio, rounded up to the nearest cent, and (y) in the case of Converted
Stock Options exercisable for Parent Ordinary Shares, (1) the product of the Conversion Rate multiplied by the per share exercise price of such Company Stock Option immediately prior to the Effective Time divided by (2) Option Ordinary
Shares Exchange Ratio, rounded up to the nearest pence.
(b) As of the conversion pursuant to
Section 2.4(a), each Converted Stock Option shall have, and be subject to, the same terms and conditions set forth in the applicable Company Option Plan and the option agreement pursuant to which the corresponding Company Stock Option was
granted, as in effect immediately prior to the Effective Time, except as otherwise provided herein or in the applicable Company Stock Option Plan and the option agreement pursuant to which the corresponding Company Stock Option was granted.
(c) To the extent that any Company Stock Option constituted an incentive stock option (within the
meaning of Section 422 of the Code) immediately prior to the Effective Time, such Company Stock Option shall continue to qualify as an incentive stock option to the maximum extent permitted by Section 422 of the Code.
(d) Parent shall convert Company Stock Options into Converted Stock Options in such a manner as to ensure that
the Converted Stock Options are not subject to Section 409A of the Code as a result of such assumption and conversion.
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(e) As of the Effective Time, each restricted stock unit with respect to
shares of Company Common Stock granted under a Company Option Plan that is outstanding immediately prior to the Effective Time (each, a
Company RSU
) shall, by virtue of the Merger and without any action on the part of the holder
thereof, be converted into a restricted stock unit (as converted, a
Converted Parent RSU
), on the same terms and conditions (including applicable vesting requirements and deferral provisions) as applied to each such Company RSU
immediately prior to the Effective Time, with respect to, at the election of Parent, (i) the number of ADSs that is equal to the number of shares of Company Common Stock subject to the Company RSU immediately prior to the Effective Time
multiplied by the Option ADS Exchange Ratio (rounded to the nearest whole share) or (ii) the number of Parent Ordinary Shares that is equal to the number of shares of Company Common Stock subject to the Company RSU immediately prior to the
Effective Time multiplied by Option Ordinary Shares Exchange Ratio (rounded to the nearest whole share), provided that all Converted Parent RSUs held by persons who are not residents of Europe or India shall be with respect to ADSs unless otherwise
agreed by Parent and the Company. As of the Effective Time, each Converted Parent RSU shall have, and be subject to, the same terms and conditions set forth in the applicable Company Option Plan and the Company RSU agreement pursuant to which the
corresponding Company RSU was granted, as in effect immediately prior to the Effective Time, except as otherwise provided herein or in the applicable Company Option Plan and the Company RSU agreement pursuant to which the corresponding Company RSU
was granted.
(f) Parent will (i) reserve for issuance the number of ADSs and Parent Ordinary Shares that
will become subject to the Converted Stock Options and Converted Parent RSUs referred to in this Section 2.4 and (ii) issue or cause to be issued the appropriate number of ADSs and Parent Ordinary Shares, upon the exercise of the Converted
Stock Options and Converted Parent RSUs. As soon as practicable after the Effective Time, Parent will prepare and file with the SEC a registration statement on Form S-8 (or other appropriate form) registering a number of ADSs and underlying Parent
Ordinary Shares necessary to fulfill Parents obligations under this Section 2.4. Such registration statement will be kept effective (and the current status of the prospectus required thereby will be maintained) for at least as long as
Converted Stock Options and Converted Parent RSUs remain outstanding.
(g) Prior to the Effective Time, the
Company and Parent shall cooperate in taking all actions that are necessary to cause the Company Stock Options and Company RSUs to be assumed and converted as provided in this Section 2.4. As soon as practicable after the Effective Time, Parent will
deliver to the holders of the Converted Stock Options and Converted Parent RSUs appropriate notices setting forth the effect of the Merger on such holders rights pursuant to the Company Stock Plans and the agreements evidencing the grants of
such Company Stock Options and that such Company Stock Options and Company RSUs will continue in effect as the Converted Stock Options and Converted Parent RSUs on the same terms and conditions (subject to the adjustment required by this Section 2.4
after giving effect to the Merger).
(h) Each outstanding right to purchase shares of Company Common Stock
under any outstanding offering period as of the date of the Original Agreement under the 1995 Employee Stock Purchase Plan (the
ESPP
) shall terminate not later than the day immediately prior to the day on which occurs the
Effective Time, provided that the Company may permit each participant in the ESPP to purchase from the Company as many whole shares of Company Common Stock as the balance of the participants account will allow, at the applicable price
determined under the terms of the ESPP for each such outstanding offering period, using such date as the final purchase date for such offering period, and any amounts remaining in any participants account after any such purchase will be
refunded to the participant.
Section 2.5 Appraisal Rights. Notwithstanding anything to the contrary set forth in this
Agreement, all shares of Company Common Stock issued and outstanding immediately prior to the Effective Time and held by a stockholder who shall have neither voted in favor of the Merger nor consented thereto in writing and who shall have properly
and validly exercised such stockholders statutory rights of appraisal in respect of such shares of Company Common Stock in accordance with Section 262 of the DGCL (
Dissenting Company Shares
) shall not be converted into,
or represent the right to receive, the Merger Consideration pursuant to Section 2.1 and Section 2.3. Any such stockholder shall be entitled to receive payment of the appraised value of such Dissenting
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Company Shares in accordance with the provisions of Section 262 of the DGCL; provided, however, that notwithstanding the foregoing, all Dissenting Company Shares held by a stockholder who
shall have failed to perfect or who shall have effectively withdrawn or lost such stockholders statutory right to appraisal of such Dissenting Company Shares under such Section 262 of the DGCL shall thereupon be deemed to have been
converted into, and to have become exchangeable for, the right to receive the Merger Consideration, without any interest thereon, upon surrender of the certificate or certificates that formerly evidenced such shares of Company Common Stock in the
manner set forth in Section 2.3. The Company shall give Parent (x) prompt notice of any demands for appraisal received by the Company, withdrawals of such demands, and any other instruments served pursuant to DGCL and received by the
Company in respect of Dissenting Company Shares and (y) the opportunity to direct and control all negotiations and proceedings with respect to demands for appraisal under DGCL in respect of Dissenting Company Shares. The Company shall not,
except with the prior written consent of Parent, voluntarily make any payment with respect to any demands for appraisal or settle or offer to settle any such demands for payment in respect of Dissenting Company Shares.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and
warrants to Parent and Merger Sub, (i) subject to such exceptions or qualifications to representations and warranties as are disclosed in the Company Disclosure Letter and (ii) except as set forth in the Company Public Reports filed after
January 1, 2008 and at least one (1) Business Day prior to the date of the Original Agreement (other than (A) any information set forth in any risk factor or forward-looking statements section contained in such
Company Public Reports, (B) any other forward-looking statements contained in such Company Public Reports that are of a nature that they speculate as to future developments, and (C) any information set forth in the 2010 Company Condensed
Accounts) (it being understood that any matter disclosed in the Company Disclosure Letter or in, or incorporated by reference in, such Company Public Reports shall be deemed disclosed with respect to any section of this Agreement to which the matter
relates to the extent the relevance to each such section is reasonably apparent) as follows:
Section 3.1 Organization and
Power.
(a) The Company is a corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has the requisite power and authority to own, lease and operate its assets and properties and to carry on its business as now conducted.
(b) Each of the Companys Subsidiaries is a corporation, limited liability company or other legal entity duly
organized, validly existing and (where such term is of legal significance) in good standing under the laws of its jurisdiction of organization and has the requisite power and authority to own, lease and operate its assets and properties and to carry
on its business as now conducted, except where the failure to be so organized, existing and in good standing does not have and would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect.
Section 3.2 Foreign Qualifications. The Company and each of its Subsidiaries is duly qualified or licensed to do business as a
foreign corporation, limited liability company or other legal entity and (where such term is of legal significance) is in good standing in each jurisdiction where the character of the assets and properties owned, leased or operated by it or the
nature of its business makes such qualification or license necessary, except where failures to be so qualified or licensed or in good standing would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse
Effect.
Section 3.3 Corporate Authorization. The Company has all necessary corporate power and authority to enter into
this Agreement and, subject to adoption of this Agreement by the affirmative vote of the holders of a majority of the outstanding shares of Company Common Stock (the
Requisite Company Vote
), to
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consummate the transactions contemplated by this Agreement. The board of directors of the Company has adopted resolutions by a majority of such directors: (a) approving and declaring
advisable the Merger, this Agreement and the transactions contemplated by this Agreement; (b) declaring that it is in the best interests of the stockholders of the Company that the Company enters into this Agreement and consummates the Merger
upon the terms and subject to the conditions set forth in this Agreement; (c) directing that adoption of this Agreement be submitted to a vote at a meeting of the stockholders of the Company; (d) recommending to the stockholders of the
Company that they adopt this Agreement (the
Company Board Recommendation
); and (e) to include the Company Board Recommendation in the Company Proxy Statement. The execution, delivery and performance of this Agreement by the
Company and the consummation by the Company of the transactions contemplated by this Agreement have been duly and validly authorized by all necessary corporate action on the part of the Company, subject to the Requisite Company Vote.
Section 3.4 Enforceability. This Agreement has been duly executed and delivered by the Company and, assuming the due authorization,
execution and delivery hereof by the other parties hereto, constitutes a legal, valid and binding agreement of the Company, enforceable against the Company in accordance with its terms.
Section 3.5 Organizational Documents. The Company has made available to Parent correct and complete copies of the certificate of
incorporation and bylaws of the Company, as in effect on the date of the Original Agreement (collectively, the
Company Organizational Documents
).
Section 3.6 Subsidiaries. A correct and complete list of all Subsidiaries of the Company and their respective jurisdictions of organization is set forth in Section 3.6 of the Company Disclosure
Letter. Each of the Subsidiaries of the Company is wholly-owned by the Company, directly or indirectly, free and clear of any Liens and the Company does not own, directly or indirectly, any capital stock of, or any other securities convertible or
exchangeable into or exercisable for capital stock of, any Person other than the Subsidiaries of the Company.
Section 3.7
Governmental Authorizations. The execution, delivery and performance of this Agreement by the Company and the consummation by the Company of the transactions contemplated by this Agreement do not and will not require any consent, approval or
other authorization of, or filing with or notification to (collectively,
Governmental Authorizations
), any international, supra-national, national, federal, state, provincial or local governmental, regulatory or administrative
authority, agency, commission, court, tribunal, arbitral body or self-regulated entity, whether of the United States, the United Kingdom, Israel, the European Union or otherwise (each, a
Governmental Entity
), other than:
(a) the filing of the Certificate of Merger with the Secretary of State of the State of Delaware;
(b) the filing with the United States Securities and Exchange Commission (the
SEC
) of (i) a proxy
statement (the
Company Proxy Statement
) relating to the special meeting of the stockholders of the Company to be held to consider the adoption of this Agreement (the
Company Stockholders Meeting
) and
(ii) any other filings and reports that may be required in connection with this Agreement and the transactions contemplated by this Agreement under the Securities Act of 1933 (the
Securities Act
) and the Securities Exchange
Act of 1934 (the
Exchange Act
);
(c) compliance with the rules and regulations of The NASDAQ
Stock Market; and
(d) compliance with the pre-merger notification requirement under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 (the
HSR Act
).
Section 3.8 Non-Contravention. The execution,
delivery and performance of this Agreement by the Company and the consummation by the Company of the transactions contemplated by this Agreement do not and will not:
(a) contravene or conflict with, or result in any violation or breach of, any provision of the Company Organizational
Documents;
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(b) contravene or conflict with, or result in any violation or breach of,
any Laws or Orders applicable to the Company or any of its Subsidiaries, assuming that all consents, approvals, authorizations, filings and notifications described in Section 3.7 and the Requisite Company Vote have been obtained or made;
(c) result in any violation or breach of, or constitute a default (with or without notice or lapse of time or
both) under, any Contracts to which the Company or any of its Subsidiaries is a party or by which any of their assets are bound (collectively,
Company Contracts
), that is a Company Material Contract;
(d) require any consent, approval or other authorization of, or filing with or notification to, any Person under any
Company Material Contract;
(e) give rise to a right or result in any termination, cancellation, amendment,
modification or acceleration of any rights or obligations under any Company Material Contract; or
(f) cause
the creation or imposition of any Liens on any assets of the Company or its Subsidiaries, other than such as would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect.
Section 3.9 Capitalization.
(a) The authorized capital stock of the Company consists solely of (i) 105,000,000 shares of Company Common Stock and (ii) 3,000,000 shares of preferred stock, par value $0.001 per share
(
Company Preferred Stock
).
(b) As of the close of business on June 13, 2011,
(i) 50,079,766 shares of Company Common Stock were issued and outstanding (not including any such shares held in treasury by the Company and its Subsidiaries), (ii) 30,493 shares of Company Common Stock were held in treasury by the Company
and its Subsidiaries, (iii) 3,317,708 shares of Company Common Stock were reserved for issuance under the Company Option Plans, (iv) 1,958,766 shares of Company Common Stock reserved for issuance under the ESPP, and (v) no shares of
Company Preferred Stock were issued and outstanding or reserved for issuance.
(c) Since the close of business
on February 18, 2011, no shares of capital stock of the Company, or securities convertible or exchangeable into or exercisable for shares of capital stock of the Company, have been issued, other than upon exercise of the Company Stock Options
outstanding on that date (or granted thereafter in compliance with this Agreement) or as a result of vesting of Company RSUs outstanding on that date (or granted thereafter in compliance with this Agreement) or purchases of Company Common Stock
under the ESPP.
(d) All shares of Company Common Stock that are issued and outstanding or are subject to
issuance prior to the Effective Time (i) are or, upon such issuance on the terms and subject to the conditions specified in the instruments under which they are issuable, will be duly authorized, validly issued, fully paid and non-assessable
and (ii) will not have been issued in violation of any pre-emptive rights.
(e) There are no outstanding
contractual obligations of the Company or any of its Subsidiaries (i) to repurchase, redeem or otherwise acquire any shares of Company Common Stock or capital stock of any Subsidiary of the Company or (ii) to make any investment in
(A) any Subsidiary of the Company that is not wholly owned by the Company or (B) any other Person.
(f) Each outstanding share of capital stock of each Subsidiary of the Company is duly authorized, validly issued, fully
paid and non-assessable and was not issued in violation of any pre-emptive rights.
Section 3.10 Options; Company RSUs;
Restricted Stock Awards; ESPP.
(a) As of June 13, 2011, (i) Company Stock Options to acquire an
aggregate of 8,325,675 shares of Company Common Stock have been granted and are outstanding under the Company Option Plans, (ii) Company RSUs to acquire 2,859,999 shares of Company Common Stock have been granted and are outstanding under
Company Option Plans, (iii) there are no unvested restricted shares of Company Common Stock granted and outstanding under the Company Option Plans, and (iv) elections have been made under
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the ESPP to purchase on July 31, 2011 no more than $1,641,881 of Company Common Stock pursuant to the terms thereof which remain unsatisfied. Except for (i) such Company Stock Options
and Company RSUs and (ii) an aggregate of 3,317,708 shares of Company Common Stock that remain available for future grant under the Company Option Plans and 1,958,766 shares of Company Common Stock reserved for issuance under the ESPP, as of
the date of the Original Agreement, there are no options, warrants, calls, conversion rights, stock appreciation rights, phantom stock awards, redemption rights, repurchase rights or other rights, agreements, arrangements or commitments to which the
Company or any of its Subsidiaries is a party (A) relating to the issued or unissued capital stock or other securities of the Company or any of its Subsidiaries or (B) obligating the Company or any of its Subsidiaries to issue or sell any
shares of their capital stock or other securities. All Company Options and Company RSUs granted in accordance with Section 102 of the ITO were deposited in accordance with the provisions of Section 102 with the Trustee.
(b) The Company has made available to Parent (i) correct and complete copies of all Company Option Plans, the ESPP
and all forms of award agreements with respect to options and other stock awards issued under those Company Option Plans, including all Company Stock Options, Company RSUs and restricted stock agreements and (ii) a correct and complete list of
the following information, as of the date of the Original Agreement and in each case as applicable, with respect to each Company Stock Option and Company RSU: (A) the exercise price per share of Company Common Stock; (B) the number of
shares of Company Common Stock subject to the award; (C) the Company Option Plan under which the award was granted; and (D) the dates on which the award was granted.
Section 3.11 Voting.
(a) The Requisite Company Vote is the only
vote of the holders of any class or series of the capital stock of the Company or any of its Subsidiaries necessary (under the Company Organizational Documents, the DGCL, other applicable Laws or otherwise) to approve and adopt this Agreement, the
Merger and the other transactions contemplated by this Agreement.
(b) Other than the Company Voting
Agreements, there are no voting trusts, proxies or similar agreements, arrangements or commitments to which the Company or any of its Subsidiaries is a party or of which the Company has Knowledge with respect to the voting of any shares of capital
stock of the Company or any of its Subsidiaries. There are no bonds, debentures, notes or other instruments of indebtedness of the Company or any of its Subsidiaries that have the right to vote, or that are convertible or exchangeable into or
exercisable for securities having the right to vote, on any matters on which stockholders of the Company may vote.
Section
3.12 Public Reports.
(a) The Company has timely filed with the SEC, and has made available to Parent correct
and complete copies of, all forms, reports, schedules, statements and other documents required to be filed by the Company with the SEC since January 1, 2008 (collectively, the
Company Public Reports
). The Company Public
Reports (i) were prepared in accordance with the requirements of the Securities Act and the Exchange Act and (ii) did not, at the time they were filed, contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which such statements were made, not misleading.
(b) Neither the Company nor any of its Subsidiaries is a party to, or has any commitment to become a party to, any
off-balance sheet partnership or any Contract or arrangement relating to any transaction or relationship between or among the Company and 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, or any off-balance sheet arrangement (as defined in Item 303(a) of Regulation S-K of the SEC).
(c) Each of the principal executive officers of the Company and the principal financial officer of the Company (or each
former principal executive officer of the Company and each former principal financial
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officer of the Company, as applicable) has made all certifications required by Rule 13a-14 or 15d-14 under the Exchange Act and Sections 302 and 906 of the Sarbanes-Oxley Act with
respect to the Company Public Reports, and the statements contained in each such certification, at the time of filing or submission of such certification, were true and accurate. For purposes of this Agreement, principal executive
officer and principal financial officer shall have the meanings given to such terms in the Sarbanes-Oxley Act. Neither the Company nor any of its Subsidiaries has outstanding, or has arranged any outstanding, extensions of
credit to directors or executive officers in violation of Section 402 of the Sarbanes-Oxley Act. As of the date of the Original Agreement, the Company has no reason to believe that its outside auditors and its principal executive officer
and principal financial officer will not be able to give, without qualification, the certificates and attestations required pursuant to the Sarbanes-Oxley Act when next due.
(d) No Subsidiary of the Company is subject to the periodic reporting requirements of the Exchange Act or is otherwise
required to file any forms, reports, schedules, statements or other documents with the SEC, any other Governmental Entity (whether or not located in the United States) that performs a similar function to that of the SEC or any securities exchange or
quotation service.
Section 3.13 SEC Disclosure Controls and Procedures.
(a) The Company (i) maintains disclosure controls and procedures (as defined in Rules 13a-15(e) and
15d-15(e) under the Exchange Act) to provide reasonable assurance that material information relating to the Company, including its consolidated subsidiaries, is made known to its principal executive officer and principal financial officer;
(ii) maintains internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act); and (iii) has evaluated the effectiveness of the Companys disclosure controls and procedures
as required by Rule 13a-15(a) under the Exchange Act.
(b) The Company has disclosed, based on the most recent
evaluation of internal control over financial reporting, to the Companys auditors and the audit committee of the Companys board of directors significant deficiencies and material weaknesses (each as defined in
Rule 12b-2 under the Exchange Act) in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Companys ability to record, process, summarize and report financial information To
the Knowledge of the Company, there is no fraud, whether or not material, that involves management or other employees who have a significant role in the Companys internal control over financial reporting.
(c) Since January 1, 2008, (i) neither the Company, nor, to the Knowledge of the Company, any director or
officer of the Company, has received or otherwise had or obtained Knowledge of any written material complaint, allegation, assertion or claim regarding the accounting or auditing practices, procedures, methodologies or methods of the Company or any
of its Subsidiaries, or their respective internal accounting controls, including any written material complaint, allegation, assertion or claim that the Company or any of its Subsidiaries has engaged in accounting or auditing practices that do not
comply with U.S. GAAP or the Companys published internal accounting controls, and (ii) no attorney representing the Company or any of its Subsidiaries, whether or not employed by the Company or any of its Subsidiaries, has rendered a
written report to the board of directors of the Company or any committee thereof containing evidence of a material violation of applicable securities Laws, breach of fiduciary duty or similar violation by the Company or any of its officers or
directors.
Section 3.14 Financial Statements. The audited consolidated financial statements and unaudited consolidated
interim financial statements of the Company and its consolidated Subsidiaries for the periods from January 1, 2008, included or incorporated by reference in the Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q that are included in
the Company Public Reports: (a) complied as to form in all material respects with the published rules and regulations of the SEC in effect at the time of filing; (b) were prepared in accordance with U.S. GAAP (except, in the case of
unaudited statements, as permitted by the rules and regulations of the SEC) applied on a consistent basis (except as may be indicated in the notes to those financial statements); and (c) fairly presented in all material respects the
consolidated financial position of the Company and its consolidated Subsidiaries as of the dates thereof and their consolidated results of operations and cash
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flows for the periods indicated (subject, in the case of any unaudited interim financial statements, to normal year-end adjustments and the absence of footnotes). The Company has delivered to
Parent a correct and complete copy of the 2010 Company Condensed Accounts. The 2010 Company Condensed Accounts fairly present in all material respects the consolidated financial position of the Company and its consolidated Subsidiaries as of
December 31, 2010 and the consolidated results of operations for the periods then ended, except to the extent that such 2010 Company Condensed Accounts are unaudited, do not contain full financial statements or notes thereto, are not presented
in accordance with U.S. GAAP and remain subject to adjustment.
Section 3.15 Liabilities. There are no liabilities or
obligations of any kind, whether accrued, contingent, absolute, inchoate or otherwise (collectively,
Liabilities
) of the Company or any of its Subsidiaries which are required to be reflected or reserved against on a consolidated
balance sheet of the Company, including the notes thereto, under U.S. GAAP, other than: (a) Liabilities reflected or reserved against in the consolidated balance sheet of the Company and its consolidated Subsidiaries as of December 31,
2010 and the notes thereto set forth in the 2010 Company Condensed Accounts; (b) Liabilities incurred since December 31, 2010 in the ordinary course of business consistent with past practice that would not reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect; (c) Liabilities or obligations incurred directly pursuant to this Agreement; and (d) any other Liabilities that would not reasonably be expected to have, individually or
in the aggregate, a Company Material Adverse Effect.
Section 3.16 Absence of Certain Changes. Since December 31,
2010, there has not been any Company Material Adverse Effect. Except for Liabilities incurred in connection with this Agreement, since December 31, 2010, (a) the Company and each of its Subsidiaries have conducted their business in the
ordinary course consistent with past practice and (b) neither the Company nor any of its Subsidiaries has taken any action which, if taken after the date of the Original Agreement, would be prohibited by Section 5.1.
Section 3.17 Litigation. There are no material Legal Actions pending or, to the Knowledge of the Company, threatened against the
Company or any of its Subsidiaries or any director, officer or employee of the Company or any of its Subsidiaries or other Person for whom the Company or any of its Subsidiaries may be liable. There are no material Orders outstanding against the
Company or any of its Subsidiaries.
Section 3.18 Contracts.
(a) Section 3.18 of the Company Disclosure Letter sets forth, as of the date of the Original Agreement, a list of:
(i) all Company Contracts required to be described in, or filed as an exhibit to, any Company Public Report
that are not so described or filed as required by the Securities Act or the Exchange Act, as the case may be;
(ii) all Company Contracts that, to the Knowledge of the Company (x) impose any material limitations, restrictions or
penalties on the Companys manufacture, sale or distribution of any current or future Company Product or a material aspect of the Companys business, or which after the Effective Time could impose similar restrictions on Parent or any of
its Subsidiaries, with respect to any of their respective products or services or a material aspect of the operation of their businesses, or (y) grant the other party to such Company Contract or a third party most favored nation
pricing or terms that (1) apply to the Company or any of its Subsidiaries or (2) following the Effective Time, would apply to Parent or any of its Subsidiaries other than the Surviving Corporation or its Subsidiaries;
(iii) all material Company Contracts providing for (A) indemnification (including with respect to Intellectual
Property Rights) or (B) any material guaranty of third party obligations, in each of the foregoing cases entered into outside the ordinary course of business;
(iv) all material Company Contracts relating to revenue or profit-sharing joint ventures (whether in partnership, limited
liability company or other organizational form);
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(v) all Company Contracts with any Governmental Entity (other than ordinary
course customer Contracts providing for payments below $1,000,000 and pursuant to which the counterparty does not have any rights to the Companys or its Subsidiaries products or services or Company Intellectual Property Rights other than its
rights to use the products or services sold under such Company Contract as a customer);
(vi) all Company
Contracts entered into in the last five years in connection with the settlement or other resolution of any Legal Action that has any material continuing obligation, liability or restriction on the part of the Company or any of its Subsidiaries;
(vii) (A) all revenue-generating Company Contracts that were entered into after January 1, 2009 or were
entered into before January 1, 2009 and remain in effect with the ten largest customers of the Company and its Subsidiaries (determined on the basis of revenues received by the Company or any of its Subsidiaries in the fiscal year ended
December 31, 2010) and that have material, known, unfulfilled obligations on behalf of the customer, and (B) to the extent not disclosed pursuant to clause (vii)(A), the ten largest revenue generating Company Contracts (determined on the
basis of revenues received by Company or any of its Subsidiaries in the fiscal year ended December 31, 2010);
(viii) all Company Contracts that were entered into after January 1, 2009 or were entered into before January 1, 2009 and remain in effect with the ten largest suppliers to the Company and its
Subsidiaries (determined on the basis of amounts paid by the Company or any of its Subsidiaries in the fiscal year ended December 31, 2010) and that have material, known, unfulfilled obligations on behalf of the supplier.
The Company Contracts referred to in clauses (i) through (viii) of this Section 3.18(a) and the Company IP Contracts are collectively
referred to in this Agreement as
Company Material Contracts
. The Company has made available to Parent or its Representatives correct and (except for redaction of certain information in certain Company Contracts) complete copies of
all Company Material Contracts.
(b) Except for such matters as would not, individually or in the aggregate,
reasonably be expected to be material to the Company and its Subsidiaries, taken as a whole, (i) all Company Material Contracts are valid and binding, in full force and effect and enforceable in accordance with their respective terms, except
(A) as may be limited by bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium or similar Laws of general application affecting or relating to the enforcement of creditors rights generally and (B) subject to general
principles of equity, whether considered in a proceeding in Law or in equity (the
Bankruptcy and Equity Exception
), (ii) neither the Company nor any of its Subsidiaries is in violation or breach of, or in default (with or
without notice or the lapse of time or both) under, any Company Material Contracts and, (iii) to the Knowledge of the Company, no other Person is in material violation or breach of, or in default (with or without notice or the lapse of time or
both) under, any Company Material Contracts.
Section 3.19 Benefit Plans.
(a) Section 3.19(a) of the Company Disclosure Letter lists all material employee benefit plans within the
meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974 (
ERISA
), stock purchase, stock option, severance, employment, consulting, change-of-control, bonus, incentive, deferred compensation and other
benefit plans (including the Company Options Plans), agreements, programs, policies or commitments, whether or not subject to ERISA, (i)(A) under which any current or former director, officer, employee or consultant of the Company or any of its
Subsidiaries has any right to benefits and (B) which are or have been maintained, sponsored or contributed to by the Company or any of its Subsidiaries or to which the Company or any of its Subsidiaries makes or is or has been required to make
contributions with respect to such directors, officers, employees or consultants or (ii) with respect to which the Company or any of its Subsidiaries has any direct or indirect liability, whether contingent or otherwise. All such plans,
agreements, programs, policies and commitments, including Israeli Benefit Plans, are collectively referred to as the
Company Benefit Plans
.
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(b) With respect to each Company Benefit Plan, if applicable, the Company
has made available to Parent true, complete and correct copies of (i) the plan document and any amendments, (ii) the most recent summary plan description, (iii) the most recent annual report on Form 5500 (including all schedules),
(iv) the most recent annual audited financial statements, actuarial reports and opinion, (v) if the Company Benefit Plan is intended to qualify under Section 401(a) of the Code, the most recent determination letter or opinion letter
received from the Internal Revenue Service (the
IRS
), and (vi) any filings made with the Israeli Tax Authority (
ITA
) with respect to each Israeli Benefit Plan and any notices of the ITA.
(c) Neither the Company nor any of its Subsidiaries, nor any other entity which, together with the Company or any of its
Subsidiaries would be treated as a single employer under Section 4001 of ERISA or Section 414 of the Code (an
ERISA Affiliate
) maintains, sponsors or contributes to or has any obligation to contribute to, and has not
within the preceding six years maintained, sponsored or contributed or incurred any liability to or had any obligation to contribute to, any employee benefit plan subject to Section 412 of the Code or Title IV of ERISA; any
multiemployer plan as defined in Section 3(37) of ERISA; any multiple employer plan as defined in Section 4063 or 4064 of ERISA; or any plan described in Section 413 of the Code.
(d) Each Company Benefit Plan is in compliance in all material respects with ERISA, the Code and other applicable Laws.
For each Company Benefit Plan that is intended to qualify under Section 401(a) of the Code, (i) a favorable determination letter has been issued by the IRS with respect to such qualification and (ii) no event has occurred since the
date of such qualification that has or is reasonably likely to materially adversely affect such qualification. Except as would not reasonably be expected to be, individually or in the aggregate, material to the Company and its Subsidiaries, taken as
a whole, no individual who has performed services for the Company or any of its Subsidiaries has been improperly excluded from participation in any Company Benefit Plan, and neither the Company nor any of its Subsidiaries has any direct or indirect
liability, whether actual or contingent, with respect to any misclassification of any person as an independent contractor rather than as an employee, or with respect to any employee leased from another employer.
(e) None of the Company, any of its Subsidiaries or any Company Benefit Plan has any liability or obligation with respect
to or provides health, medical, life insurance or death benefits to current or former employees of the Company or any of its Subsidiaries beyond their retirement or other termination of service, other than coverage mandated by the Consolidated
Omnibus Budget Recommendation Act of 1985 (
COBRA
) or Section 4980B of the Code, or any similar state group health plan continuation Laws, the cost of which is fully paid by such current or former employees or their
dependents.
(f) The execution and delivery of this Agreement and the consummation of the transactions
contemplated hereby will not (either alone or in combination with another event) (i) result in any payment becoming due, or increase the amount of any compensation due, to any current or former employee of the Company or any of its
Subsidiaries, (ii) increase any benefits otherwise payable under any Company Benefit Plan, (iii) result in the acceleration of the time of payment or vesting of any compensation or benefits to any current or former employee of the Company
or any of its Subsidiaries, or (iv) result in any funding, through a grantor trust or otherwise, of any compensation or benefits to any current or former employee of the Company or any of its Subsidiaries.
(g) There are no material pending, or, to the Knowledge of the Company, threatened, claims or litigation against any
Company Benefit Plan with respect to employees or former employees of the Company or any of its Subsidiaries, other than ordinary claims for benefits by participants and beneficiaries.
(h) Each Company Benefit Plan providing for deferred compensation that constitutes a nonqualified deferred
compensation plan (as defined in Section 409A(d)(1) of the Code and applicable regulations) for any service provider to either the Company, its Subsidiaries or any of their respective ERISA Affiliates complies in all material
respects with the requirements of Section 409A of the Code and the regulations promulgated thereunder.
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(i) 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 Benefit 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 Benefit Plan or for which the Company or any of its Subsidiaries has any indemnification obligation.
(j) There is no contract, agreement, plan or arrangement to which the Company is a party, including the provisions of this
Agreement, which, individually or collectively, could give rise to the payment of any amount that would not be deductible pursuant to Sections 280G of the Code.
(k) The Israeli Sub does not have any material liability to the ITA with respect to any Israeli Benefit Plan. The Israeli Sub has made adequate provisions with respect to the payment of any payment under
any Israeli Benefit Plan, including severance pay provided under applicable Law, agreement or otherwise, except for such payments that can be delayed in the ordinary course of business as permitted under applicable Laws.
(l) No events have occurred or are expected to occur with respect to any Israeli Benefit Plan that would cause a material
change in the cost of providing the benefits under such plan or would cause a material change in the cost of providing for other liabilities of such plan.
Section 3.20 Labor Relations.
(a) (i) No employee of the Company or any of
its Subsidiaries is represented by a union and, to the Knowledge of the Company, no union organizing efforts have been conducted within the last three years or are now being conducted, (ii) neither the Company nor any of its Subsidiaries is a
party to any material collective bargaining agreement or other labor contract, and (iii) neither the Company nor any of its Subsidiaries currently has, or, to the Knowledge of the Company, is there now threatened, a strike, picket, work
stoppage, work slowdown or other organized labor dispute that would reasonably be expected to be, individually or in the aggregate, be material to the Company and its Subsidiaries, taken as a whole. Neither the Company nor its Israeli Sub is a party
to, or otherwise bound by, any material consent decree with, or citation or other material order, injunction, judgment, doctrine, decree, ruling, writ, assessment or arbitration award of any Governmental Entity relating to employees or employment
practices other than such extension orders applicable to all employees in Israel.
(b) Each of the Company and
its Subsidiaries is in compliance in all material respects with all applicable Laws relating to the employment of labor, including all applicable Laws relating to wages, hours, collective bargaining, employment discrimination, civil rights, safety
and health, workers compensation, pay equity and the collection and payment of withholding and/or social security taxes, and neither the Company nor any of its Subsidiaries has incurred any material liability or obligation under the Worker
Adjustment and Retraining Notification Act or any similar state or local Law within the last six months that remains unsatisfied.
(c) The Israeli Sub is in compliance in all material respects with all applicable Israeli Laws respecting employment, employment practices, terms and conditions of employment, employee safety and wages
and hours, including the Advance Notice for Dismissal and Resignation Law, 5761 2001, the Notification to an Employee (Terms of Employment) Law, 5762 2002, the Wage Protection Law 5718 1958, Prior Notice to the Employee Law, 5762 2002, the
Prevention of Sexual Harassment Law, 5758 1998, the Hours of Work and Rest Law, 5711 1951, the Annual Leave Law, 5711 1951 and the Employment by Human Resource Contractors Law, 5756 1996.
(d) The Israeli Sub is not required (under any law, contract or otherwise) to provide benefits or working conditions
beyond the minimum benefits and working conditions required by law to be provided pursuant to
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the rules and regulations of the Israeli Histadrut (General Federation of Labor), the Israeli Coordinating Bureau of Economic Organization and the Israeli Industrialists Association. The
Israeli Sub has not and is not subject to, and no employee or consultant of the Israeli Subsidiary benefits from, any material extension order (
tzavei harchave
) or any general Contract or arrangement with respect to employment or termination
of employment, except those extension orders that apply to all Israeli companies generally.
(e) There are no
unwritten policies, practices or customs or any other contracts, undertakings or agreements of the Company or its Subsidiaries that, by extension, could reasonably be expected to entitle any current or former employee to benefits in addition to what
such employee is entitled by applicable legal requirements or under the terms of such employees employment contract, except where such benefits, individually or in the aggregate, would not reasonably be expected to be material to the Company
and its Subsidiaries, taken as a whole.
(f) Neither the Company nor any of its Subsidiaries has engaged any
consultants, subcontractors or freelancers who, according to Israeli Law, would be entitled to the rights of an employee vis-à-vis the Company or any of its Subsidiaries, including rights to severance pay, vacation, recuperation pay (
dmei
havraa
) and other employee-related statutory benefits. The Company is not applying Israeli labor Laws to any of its consultants and/or independent contractors, and is not required to do so.
Section 3.21 Taxes.
(a) All Tax Returns required to be filed by or with respect to the Company or any of its Subsidiaries have been timely filed, and all such Tax Returns are true, complete and correct in all material
respects, except for Tax Returns as to which the failure to so file or be so true, complete and correct would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect.
(b) The Company and its Subsidiaries have fully and timely paid all material Taxes shown to be due on the Tax Returns
referred to in Section 3.21(a).
(c) There are no outstanding agreements extending or waiving the
statutory period of limitations applicable to any claim for, or the period for the collection, assessment or reassessment of, Taxes due from the Company or any of its Subsidiaries for any taxable period and no request for any such waiver or
extension is currently pending, except for such agreements or requests that would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect.
(d) No audit or other proceeding by any Governmental Entity is pending or, to the Knowledge of the Company, threatened in
writing with respect to any Taxes due from or with respect to the Company or any of its Subsidiaries, except for such audits and proceedings that would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse
Effect.
(e) All material deficiencies for Taxes asserted or assessed in writing against the Company or any of
its Subsidiaries have been fully and timely paid, settled or properly reflected in the most recent financial statements contained in the Company Public Reports, except for such deficiencies that would not reasonably be expected to have, individually
or in the aggregate, a Company Material Adverse Effect.
(f) Neither the Company nor any of its Subsidiaries
will be required to include in a taxable period ending after the Closing Date material taxable income attributable to income that accrued in a taxable period prior to the Closing Date but was not recognized for Tax purposes in such prior taxable
period (other than as properly reflected in the Companys financial statements as reserves) as a result of the installment method of accounting, the completed contract method of accounting, the long-term contract method of accounting, the cash
method of accounting, Section 481 of the Code, or otherwise.
(g) The consummation of the Merger will not
result in the repayment or clawback of any governmental grants, Tax incentives or other similar benefits applicable to the Company or its Subsidiaries (
Company Tax Incentives
) attributable to any period (or portion thereof) ending
on or before the Closing Date, or the reduction or elimination of such Company Tax Incentives for any period (or portion thereof) beginning on or after the Closing Date.
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(h) The Israeli Sub has not refunded or deducted any value added Tax that it
was not so entitled to deduct or refund. Neither the Company nor any of its Subsidiaries, or any holder of Company Common Stock (with respect to the Company Common Stock held by them) is subject to restrictions or limitations pursuant to Part E2 of
the ITO or pursuant to any Tax ruling made in connection with the provisions of Part E2 of the ITO. Neither the Company nor any of its Subsidiaries has requested or received a ruling from any Tax authority or signed a closing or other agreement with
any Tax authority other than the rulings requested or received in connection with the transactions contemplated herein. The business and affairs of the Company currently are, and since its organization and formation have been, operated and conducted
in a manner such that, for Israeli Tax purposes, the Company is treated as controlled and managed from outside of Israel.
(i) Schedule 3.21(i) of the Company Disclosure Letter lists all pending and outstanding grants, incentives, qualifications and subsidies from the government of the State of Israel or any governmental,
regulatory, administrative or quasi-governmental authority, agency or commission, or judicial or arbitral body thereof, and any outstanding application to receive the same filed by the Company or its Subsidiaries (collectively,
Israeli
Government Grants
), including Approved Enterprise Status and Privileged Enterprise Status from the Israeli Investment Center in the Israeli Ministry of Industry, Trade and Labor (the
Investment Center
) under the Law of
Encouragement of Capital Investment, 1959, grants from the Office of the Chief Scientist of the Israeli Ministry of Industry, Trade & Labor (
OCS
), and grants from Israel-United States Bi-national Industrial Research and
Development Foundation (
Bird
). Each of the Company and the Israeli Sub is entitled to claim all such Israeli Government Grants. The Company has obtained (i) a written confirmation by email from the Investment Center that it
requires no additional approval for the transaction contemplated by the Agreement (
Investment Center Confirmation
), and (ii) a written approval from the OCS, subject to Parent undertaking in standard form required by the OCS,
for the change of ownership of the Company to be effected by the Merger (the
OCS Approval
), and such confirmation and approval have not been rescinded or revoked.
(j) The Company and the Israeli Sub are in compliance in all material respects with all conditions and requirements
stipulated by the instruments of approval granted to it with respect to the (i) Approved Enterprise status of any of the Israeli Subs facilities by Israeli laws and regulations relating to such Approved Enterprise
status, (ii) grants by the OCS, and (iii) grants by Bird, and other tax benefits received by the Israeli Sub. The Israeli Sub has not received any notice of any proceeding or investigation relating to revocation or modification of any
(i) Approved Enterprise status granted with respect to any of the Israeli Subs facilities, (ii) plans approved by the OCS, or (iii) plans approved by Bird, except where such revocation or modification would not
reasonably be expected to be, individually or in the aggregate, material to the Company and its Subsidiaries, taken as a whole. All information supplied by the Israeli Sub with respect to the applications relating to such Approved
Enterprise status, grants of the OCS, and grants of Bird, was true, correct and complete in all material respects when supplied to the appropriate authorities.
Section 3.22 Environmental Matters. Since January 1, 2006, the operations of the Company and each of its Subsidiaries have complied in all material respects and currently comply in all material
respects with applicable Laws relating to (i) pollution, contamination, protection of the environment and employee health and safety, (ii) emissions, discharges, disseminations, releases or threatened releases of Hazardous Substances into
the air (indoor or outdoor), surface water, groundwater, soil, land surface or subsurface, buildings, facilities, real or personal property or fixtures and (iii) the manufacture, processing, distribution, use, treatment, storage, disposal,
removal, remediation, labeling, recycling, transport, handling, exposure of others to, or sale of any Hazardous Substances or any product or waste containing a Hazardous Substance, or product manufactured with ozone depleting substances, including
without limitation, any required payment of waste fees or charges (including but not limited to, so called e-waste fees) (collectively,
Environmental Laws
), and, to the Knowledge of the Company, the Company and each of its
Subsidiaries complied in all material respects with Environmental Laws prior to January 1, 2006. The Company and its Subsidiaries possess all Permits required under Environmental Laws necessary for their respective operations
(
Environmental Permits
), and (i) such operations are in compliance in all material respects with applicable Environmental Permits; (ii) all such Environmental Permits
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are in full force and effect in all material respects; (iii) no suspension or cancellation of any of the Environmental Permits is pending or, to the Knowledge of the Company, threatened; and
(iv) no such suspension or cancellation of such Environmental Permits will result from the transactions contemplated by this Agreement. To the Knowledge of the Company, neither the Company nor any Subsidiary has entered into any agreement
(other than a Company Lease) that may require it to guarantee, reimburse, pledge, defend, hold harmless or indemnify any other party with respect to liabilities arising out of Environmental Laws or Hazardous Substances. Except as would not
reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect, no material claim, suit or proceeding arising under or pursuant to Environmental Laws is pending, or to the Knowledge of the Company, threatened in
writing against the Company or any of its Subsidiaries. Except as would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect, to the Knowledge of the Company, no condition exists on any property,
currently or formerly, owned or operated by the Company that has given rise to, or would reasonably be expected to give rise to, any liability or obligation under Environmental Laws. This Section 3.22 shall be the only representation made by
the Company with respect to Environmental Laws, Environmental Permits, Hazardous Substances or actual or potential cleanup, remediation, removal or other response costs (including the cost of coming into compliance with Environmental Laws),
investigation costs (including fees of consultants, counsel and other experts in connection with any environmental investigation, testing, audits or studies), losses, Liabilities, payments, Damages (including any actual, punitive or consequential
damages (A) under any Environmental Laws, contractual obligations or otherwise or (B) to third parties for personal injury or property damage), civil or criminal fines or penalties, judgments or amounts paid in settlement, in each case
arising out of or relating to any obligation or liability under any Environmental Laws.
Section 3.23 Intellectual Property.
(a) All material Intellectual Property Rights owned or purported to be owned by the Company or its
Subsidiaries (the
Company Intellectual Property Rights
), are owned solely by the Company or one of its Subsidiaries and are free and clear of any material Liens. To the Knowledge of the Company, the Registered Company IP that have
been issued or registered are valid and enforceable.
(b) Section 3.23(b) of the Company Disclosure Letter
sets forth, as of the date of the Original Agreement, a correct and complete list of all IP Registrations for any Company Intellectual Property Rights (
Registered Company IP
), specifying as to each item, as applicable:
(i) the title of the item; (ii) the owner of the item; (iii) the jurisdictions in which the item is registered, issued or in which an application for registration or issuance has been filed; and (iv) the registration, issuance or
application numbers and dates.
(c) Section 3.23(c), Part 1, of the Company Disclosure Letter sets forth,
as of the date of the Original Agreement, a correct and complete list of all Contracts (collectively the
Company IP Contracts
) (i) under which the Company or any of its Subsidiaries has expressly granted a license (including
by means of a covenant not to sue or similar covenant) with respect to any material Company Intellectual Property Rights, other than non-exclusive licenses granted in the ordinary course of business or licenses that are not material to the business
of the Company or its Subsidiaries (
Company Out-Licenses
), and (ii) under which the Company or any of its Subsidiaries has expressly been granted any license (including by means of a covenant to sue or similar covenant) from
a third party with respect to any material Intellectual Property Rights, other than non-exclusive licenses relating to off-the-shelf software as such term is commonly understood (
Off-the-Shelf Software
) or other
licenses to Software that is generally commercially available for license from third parties for a fee of less than $500,000 (
Company In-Licenses
). Except as set forth in Section 3.23(c), Part 2, of the Company Disclosure
Letter, the execution and delivery of this Agreement by the Company and the consummation by the Company of the transactions contemplated by this Agreement do not and will not (i) conflict with, or result in any violation or breach of, or
default (with or without notice or lapse of time, or both) under, any Company IP Contract, (ii) give rise to a right of or result in any termination, cancelation or acceleration of any material right or material obligation set forth in any
Company IP Contract, (iii) result in a loss of a material benefit to the Company or any Subsidiary of the Company, or, following the Effective Date, Parent or the Merger Sub, as the case may be, under any
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Company IP Contract, (iv) result in the creation of any Lien in or upon any material Company Intellectual Property Rights, (v) give rise to any increased, additional, accelerated or
guaranteed material rights, entitlements, licenses relating to material Company Intellectual Property Rights, or (vi) result in or require Parent or any of its Subsidiaries to grant any rights or license (including by means of a covenant not to
sue or similar covenant) with respect to any of their respective Intellectual Property Rights or impose any limitations or restrictions on the conduct of their respective business or operations; except in the case of the foregoing subparagraphs
(i)-(vi) would not have, or be expected to have, a material adverse impact on the Company, and of its Subsidiaries or any material Company Product or line of business.
(d) To the Knowledge of Company, no Open Source Materials were used in, incorporated into, integrated, distributed or
bundled with any Company Product sold or distributed by the Company or any of its Subsidiaries in a manner that would subject any Company Product, or any other Software of the Company or its Subsidiaries, to the terms of any Open Source License. To
the Knowledge of the Company, no Company Product is subject to any Open Source License or is sold or distributed by the Company or any of its Subsidiaries as Open Source Materials.
(e) All material Company Intellectual Property Rights were either (i) developed or created by the employee or
consultant of the Company or a Subsidiary of the Company within the scope of his or her employment or consultancy or (ii) otherwise were the subject of an enforceable Contract concerning the assignment or vesting of ownership of such
Intellectual Property Rights in the Company or a Subsidiary of the Company and that included obligations of confidentiality of such Person to the Company or a Company Subsidiary. All amounts payable by or due the Company to all Persons, including
current and former employees, involved in the research, development, conception or reduction to practice of any material Company Intellectual Property Rights have been paid to the extent that any such amount is due as of the date of the Original
Agreement.
(f) Neither the Company nor any of its Subsidiaries has received any funding from any Governmental
Entity (including, for example, funding from OCS) or any university, government-owned institution, college, other educational institution or other not-for profit for the development of any material Company Intellectual Property Rights or Company
Technology. No material Company Intellectual Property Rights or Company Technology is subject to any restrictions with respect to the use, transfer, licensing or export as a result of (i) any funding the Company or any of its Subsidiaries
received from any Governmental Entity or (ii) any restrictions imposed by the Encouragement of Research and Development in Industry Law, 5744-1984, as amended, the Law for the Encouragement of Capital Investments, 1959, or any regulations and
contractual obligations imposed in connection therewith. No facilities of a Governmental Entity, university, government-owned institution, college, other educational institution or other not-for-profit company was used in the development of any of
the material Company Intellectual Property Rights owned, in whole or in part, by Company or any of its Subsidiaries. To the Knowledge of Company, no current or former employee, consultant or independent contractor of the Company or any of its
Subsidiaries who is or was involved in, or who has or will have contributed to, the creation or development of any material Company Intellectual Property Rights has performed services for, or was an employee of, or was otherwise engaged (including
as a graduate student) by any Government Entity, university, government-owned institution, college, other educational institution or other not-for-profit companies while such employee, consultant or independent contractor was also performing
services for the Company or any of its Subsidiaries and, solely or together with others, invented, developed, or created or was involved in creation or development of any material Company Intellectual Property Rights.
(g) Neither the Company nor any of its Subsidiaries or any of their respective employees has, with authorization of the
Company and on its behalf or on behalf of its Subsidiaries, participated in, participates in, or is or was a member of any, organization, body or group that is involved in setting, publishing or developing any industry standards applicable to the
Company Products in a manner that (i) places any restrictions on, or requirement with respect to, the licensing or enforcement of any material Company Intellectual Property Rights or (ii) after the consummation of the transactions
contemplated by this Agreement will place any material restrictions on, or any requirement with respect to the licensing or
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enforcement of any material Company Intellectual Property Rights owned by Parent or its Subsidiaries. Neither the Company nor any of its Subsidiaries has agreed to, or is otherwise obligated or
required to, license any Company Intellectual Property Rights to any third party, or is required to grant licenses on RAND or FRAND or ZRAND terms.
(h) To the Knowledge of the Company, neither the Company Products nor the conduct of the business of the Company and its Subsidiaries, infringes, misappropriates or otherwise violates any Intellectual
Property Rights of any other Person in a manner that has resulted in or is reasonably expected to result in a material liability to the Company or materially adversely affect the Company or the Company Products. No material claims have been received
in writing by the Company within the previous three (3) years against the Company or any of its Subsidiaries or, to Companys Knowledge, against any third party to whom the Company or any of its Subsidiaries has an indemnification
obligation, alleging that any Company Product, or the conduct of the business of the Company or any of its Subsidiaries, infringes, misappropriates or otherwise violates any Intellectual Property Rights of any Person. No claims are pending, or have
been made within the three (3) years prior to the date of the Original Agreement, by the Company or any of its Subsidiaries against a third party alleging that such third party infringes, misappropriates or otherwise violates any material
Company Intellectual Property Rights.
Section 3.24 Real Property; Personal Property.
(a) The Company and its Subsidiaries do not hold, and have never held, fee or comparable title to any real property. The
Company and its Subsidiaries have good and legal title to, or have a valid and enforceable right to use or a valid and enforceable leasehold interest in, all real property (including all buildings, fixtures and other improvements thereto) used by
them. None of the Companys and any of its Subsidiaries ownership of or leasehold interest in any such property is subject to any material Lien.
(b) Section 3.24(b) of the Company Disclosure Letter sets forth, as of the date of the Original Agreement, a list (identifying the names of the parties, the term, the address and the use thereof) of
each of the leases, subleases and other agreements (and any amendments thereto) 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 (
Company
Leases
) and the Company has made available to Parent correct and complete copies of each Company Lease providing for lease payments by the Company or any of its Subsidiaries of $100,000 or more per year. Each Company Lease providing for
lease payments by the Company or any of its Subsidiaries of $100,000 or more per year is valid, binding and enforceable, subject to the Bankruptcy and Equity Exception and, to the Knowledge of the Company, no termination event or condition or
uncured default on the part of the Company or any such Subsidiary exists under any Company Lease providing for lease payments by the Company or any of its Subsidiaries of $100,000 or more per year.
(c) The Company and its Subsidiaries have good and legal title to, or a valid and enforceable leasehold interest in, all
material personal assets used by them sufficient to conduct their respective businesses as currently conducted, except where the failure to have such title to or interest in such assets would not reasonably be expected to be material to the Company
and its Subsidiaries, taken as a whole. None of the Companys and any of its Subsidiaries ownership of or leasehold interest in any such personal assets is subject to any material Liens.
(d) The Company or its Subsidiaries currently occupy all of the sites leased under the Company Leases (the
Company Facilities
) for the operation of their business, and there are no other parties occupying, or with a right to occupy, any of the Company Facilities. The Company Facilities are in condition and repair suitable for the
conduct of the business as presently conducted therein, except where the failure to be in such suitable condition and repair would not reasonably be expected to be material to the Company and its Subsidiaries, taken as a whole. Neither the Company
nor any of its Subsidiaries could reasonably be required to expend more than $250,000 in causing any Company Facilities to comply with the surrender conditions set forth in the applicable Company Lease.
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Section 3.25 Permits; Compliance with Laws.
(a) Each of the Company and its Subsidiaries is in possession of all material franchises, grants, authorizations,
licenses, easements, variances, exceptions, consents, certificates, approvals and other permits of any Governmental Entity (
Permits
) necessary for it to own, lease and operate its properties and assets or to carry on its business
as it is now being conducted (collectively, the
Company Permits
), and all such Company Permits are in full force and effect in all material respects. No suspension or cancellation of any of the Company Permits is pending or
threatened, and no such suspension or cancellation will result from the transactions contemplated by this Agreement, except for any suspensions or cancellations that, individually or in the aggregate, would reasonably be expected to be material
to the Company and its Subsidiaries taken as a whole.
(b) Neither the Company nor any of its Subsidiaries is
in conflict in any material respect with, or in default or material violation of, (i) any Laws applicable to the Company or such Subsidiary or by which any of their assets are bound or (ii) any Company Permits.
(c) No representation is made under this Section 3.25 with respect to employee benefits, labor or environmental
matters, which matters are addressed in Section 3.19, Section 3.20 and Section 3.22, respectively.
Section
3.26 Unlawful Payments. To the Knowledge of the Company, neither the Company nor any of its Subsidiaries, nor any director or officer of the Company has made, directly or indirectly, any (a) bribe or kickback, (b) unlawful payment or
political contribution from corporate funds to governmental officials or political parties for the purpose of influencing their actions or the actions of the Governmental Entity which they represent or (c) unlawful payment from corporate funds
to obtain or retain any business.
Section 3.27 Insurance. The Company and its Subsidiaries have made copies of their
material insurance policies available to Parent.
Section 3.28 Takeover Statutes. The board of directors of the Company
has taken all necessary action to ensure that the restrictions on business combinations contained in Section 203 of the DGCL will not apply to this Agreement, the Merger or the other transactions contemplated by this Agreement, including by
approving this Agreement, the Merger and the other transactions contemplated by this Agreement. No other fair price, moratorium, control share acquisition or other similar anti-takeover laws (
Takeover
Statutes
) apply or purport to apply to this Agreement, the Merger or any of the other transactions contemplated by this Agreement.
Section 3.29 Opinion of Financial Advisor. Goldman, Sachs & Co. (the
Company Financial Advisor
) has delivered to the board of directors of the Company its opinion to the
effect that, as of the date of this Agreement and based upon and subject to the matters and assumptions set forth therein, the Merger Consideration to be paid to the stockholders of the Company is fair from a financial point of view to the
stockholders of the Company (other than Parent and its Affiliates).
Section 3.30 Brokers and Finders. No broker, finder
or investment banker other than the Company Financial Advisor is entitled to any brokerage, finders or other fee or commission in connection with the Merger or the other transactions contemplated by this Agreement based upon arrangements made
by or on behalf of the Company or any of its Subsidiaries. The Company has made available to Parent correct and complete details of any remuneration the Company Financial Advisor could receive in connection with the transactions contemplated by this
Agreement.
Section 3.31 Information. To the Knowledge of the Company, none of the information to be supplied by the
Company for inclusion or incorporation by reference in the Proxy Statement or the Form F-4 Registration Statement will, in the case of the Form F-4 Registration Statement, at the time it becomes effective and at the Effective Time, contain any
untrue statement of a material fact required to be stated in that Form F-4 Registration
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Statement or omit to state any material fact necessary to make the statements in that Form F-4 Registration Statement, in light of the circumstances under which they are made, not misleading, or,
in the case of the Proxy Statement or any amendments of or supplements to the Proxy Statement and at the time of the Company Stockholders Meeting, contain any untrue statement of a material fact or omit to state any material fact required to be
stated in that Proxy Statement or necessary in order to make the statements in that Proxy Statement, in light of the circumstances under which they are made, not misleading. The Proxy Statement (except for those portions of the Proxy Statement that
relate only to Parent and its Subsidiaries) will comply as to form in all material respects with the provisions of the Exchange Act.
Section 3.32 Compliance with Original Agreement Covenants. The Company has not failed to comply with any obligation required to be performed by it under the Original Agreement prior to the date
hereof.
Section 3.33 No Other Representations or Warranties. Except for the representations and warranties contained in
this Agreement, neither the Company nor any other person (i) makes any representation or warranty express or implied, including any implied representation or warranty, as to condition, merchantability, suitability or fitness for a particular
purpose of any of the assets used in the business of or held by the Company or any of its Subsidiaries, (ii) makes any representation or warranty, express or implied, as to the accuracy or completeness of any information regarding the Company
or any of its Subsidiaries or the business conducted by the Company or any of its Subsidiaries, in each case except as expressly set forth in this Agreement or as and to the extent required by this Agreement to be set forth in the Company Disclosure
Letter or (iii) makes any representation or warranty of any kind, express or implied, with respect to any projections, forecasts or other estimates, plans or budgets of future revenues, expenses or expenditures, future results of operations (or
any component thereof), future cash flows (or any component thereof) or future financial condition (or any component thereof) of the Company or any of its Subsidiaries or the future business, operations or affairs of the Company or any of its
Subsidiaries heretofore or hereafter delivered to or made available to Parent, Merger Sub or their respective Representatives or Affiliates.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT
Parent represents and warrants to the Company, (i) subject to such exceptions or qualifications to representations and warranties as
are disclosed in the Parent Disclosure Letter and (ii) except as set forth in the Parent Public Reports filed after January 1, 2008 and at least one (1) Business Day prior to the date of the Original Agreement (other than (A) any
information set forth in any risk factor or forward-looking statements section contained in such Parent Public Reports, (B) any other forward-looking statements contained in such Parent Public Reports that are of a
nature that they speculate as to future developments, and (C) any information set forth in the 2010 Parent Financial Statements) (it being understood that any matter disclosed in the Parent Disclosure Letter or in, or incorporated by reference
in, such Parent Public Reports shall be deemed disclosed with respect to any section of this Agreement to which the matter relates to the extent the relevance to each such section is reasonably apparent) as follows:
Section 4.1 Organization and Power.
(a) Parent is duly organized and validly existing under the laws of England and Wales and has the requisite power and authority to own, lease and operate its assets and properties and to carry on its
business as now conducted.
(b)
Merger Sub Stock
. The authorized capital stock of Merger Sub consists of
1,000 shares of Merger Sub common stock. All of the issued and outstanding capital stock of Merger Sub is owned by Parent, as Merger Subs sole stockholder. The outstanding shares of Merger Sub common stock are duly authorized and validly
issued and outstanding, fully paid and nonassessable, and not subject to or issued in violation of any preemptive rights, any purchase option, call option, right of first refusal, subscription right or any
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similar right under any provision of the DGCL, Merger Subs certificate of incorporation, bylaws or any contract or commitment to which Merger Sub is a party or otherwise bound.
(c) Each of Parents Subsidiaries is a corporation, limited liability company or other legal entity duly organized,
validly existing and (where such term is of legal significance) in good standing under the laws of its jurisdiction of organization and has the requisite power and authority to own, lease and operate its assets and properties and to carry on its
business as now conducted, except where the failure to be so organized, existing and in good standing does not have and would not reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect.
Section 4.2 Foreign Qualifications. Parent and each of its Subsidiaries is duly qualified or licensed to do business as a foreign
corporation or other legal entity and (where such term is of legal significance) is in good standing in each jurisdiction where the character of the assets and properties owned, leased or operated by it or the nature of its business makes such
qualification or license necessary, except where failures to be so qualified or licensed or in good standing would not reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect.
Section 4.3 Corporate Authorizations. Each of Parent and Merger Sub has all necessary corporate power and authority (i) to
enter into this Agreement, (ii) subject to: (a) approval as a Class 1 transaction by the holders of Parent Ordinary Shares of the transactions contemplated by this Agreement and (b) related requisite shareholder authorities and
approvals, to authorize the directors of Parent to allot the Parent Ordinary Shares underlying the ADSs pursuant to the Merger and any shares to be issued pursuant to the exercise of the converted options and restricted stock units referred to in
Sections 2.4(a) and 2.4(e) respectively (such approvals collectively, the
Requisite Parent Vote
), each at a duly convened and held general meeting of the Parent (each of such approvals requiring the affirmative vote of a
majority of the holders of Parent Ordinary Shares (or their proxies, if applicable) as (being entitled to do so) are present and vote or, in the case of a vote taken on a poll, the affirmative vote by the shareholders or their proxies representing a
majority of the Parent Ordinary Shares in respect of which votes are validly exercised) in accordance with the Companies Act and the listing rules made by the United Kingdom Listing Authority (the
UKLA
) under Part VI of the
Financial Services and Markets Act 2000 (such rules, the
Listing Rules
), to consummate the transactions contemplated by this Agreement, in accordance with Chapter 10 of the Listing Rules, and (iii) to appoint, with effect
from the Closing, the designee of the Company contemplated pursuant to Section 5.11 (the
Company Appointee
) to the board of directors of Parent. The board of directors of Parent unanimously considers that the transactions
contemplated by this Agreement will promote the success of Parent and Parents shareholders as a whole, and are in the best interests of the Parent shareholders as a whole and has unanimously adopted resolutions (a) approving this
Agreement and the transactions contemplated by this Agreement, (b) recommending to the stockholders of Parent that they vote in favor of the transactions contemplated by this Agreement (the
Parent Board Recommendation
),
(c) appointing, with effect from Closing, the Company Designees to the board of directors of Parent, (d) approving and adopting the Depositary Agreement, the establishment of the ADR Facility, the filing of the Form F-4 Registration
Statement, the 8-A Registration Statement and the Form F-6 Registration Statement with respect to the ADSs and the listing of the ADSs of the NASDAQ Stock Market and (e) to include the Parent Board Recommendation, together with the resolutions
to effect such approval, in the Parent Shareholder Circular. Following careful consideration of the Merger, and financial advice received from J.P. Morgan Cazenove (the
Parent Financial Advisor
), the board of directors of Merger
Sub has unanimously adopted resolutions approving this Agreement and the transactions contemplated by this Agreement. The execution and delivery and performance of this Agreement by each of Parent and Merger Sub and the consummation by each of
Parent and Merger Sub of the transactions contemplated by this Agreement have been duly and validly authorized by all necessary corporate action on the part of Parent and Merger Sub, subject to the Requisite Parent Vote.
Section 4.4 Enforceability. This Agreement has been duly executed and delivered by each of Parent and Merger Sub and, assuming the
due authorization, execution and delivery hereof by the other parties hereto, constitutes a legal, valid and binding agreement of each of Parent and Merger Sub, enforceable against each of them in accordance with its terms.
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Section 4.5 Organizational Documents. Parent has made available to the Company correct
and complete copies of the memorandum and articles of association of Parent and the certificates of incorporation and bylaws of Merger Sub, in each case as in effect on the date of the Original Agreement (collectively, the
Parent
Organizational Documents
).
Section 4.6 Subsidiaries. A correct and complete list of all Subsidiaries of Parent
and their respective jurisdictions of organization is set forth in Section 4.6 of the Parent Disclosure Letter. Each of the Subsidiaries of Parent is wholly-owned by Parent, directly or indirectly, free and clear of any Liens and Parent does
not own, directly or indirectly, any capital stock of, or any other securities convertible or exchangeable into or exercisable for capital stock of, any Person other than the Subsidiaries of Parent.
Section 4.7 Governmental Authorizations. The execution, delivery and performance of this Agreement by Parent and Merger Sub and the
consummation by Parent and Merger Sub of the transactions contemplated by this Agreement do not and will not require any Governmental Authorizations of or with any Governmental Entity, other than:
(a) the filing of the Certificate of Merger with the Secretary of State of the State of Delaware;
(b) the filing with the SEC of (i) registration statement on Form F-4 relating to the registration under the
Securities Act of the issuance of the ADSs in the Merger (the
Form F-4 Registration Statement
), (ii) registration statement on Form F-6 relating to the registration under the Securities Act of the issuance of the ADSs (the
Form F-6 Registration Statement
), (iii) the Form 8-A Registration Statement, and (iv) any other filings and reports that may be required in connection with this Agreement and the transactions contemplated by this
Agreement under the Securities Act and the Exchange Act;
(c) the filing with, and the approval by, the UKLA of
a prospectus (the
Parent Prospectus
) and a shareholder circular (the
Parent Shareholder Circular
and, together with the Parent Prospectus, the
Parent Circular/Prospectus
) relating to the
general meeting of the shareholders of Parent to be held to consider the transactions contemplated by this Agreement (the
Parent Shareholders Meeting
) and the issuance of the Parent Ordinary Shares underlying the ADSs contemplated
pursuant to the Merger;
(d) compliance with the rules and regulations of the London Stock Exchange and the
Financial Services Authority; and
(e) compliance with the HSR Act.
Section 4.8 Non-Contravention. The execution, delivery and performance of this Agreement by Parent and Merger Sub and the
consummation by Parent and Merger Sub of the transactions contemplated by this Agreement do not and will not:
(a) contravene or conflict with, or result in any violation or breach of, any provision of the Parent Organizational
Documents;
(b) contravene or conflict with, or result in any violation or breach of, any Laws or Orders
applicable to Parent or any of its Subsidiaries, assuming that all consents, approvals, authorizations, filings and notifications described in Section 4.7 and the Requisite Parent Vote have been obtained or made;
(c) result in any violation or breach of, or constitute a default (with or without notice or lapse of time or both) under,
any Contracts to which Parent or any of its Subsidiaries is a party or by which any of their assets are bound (collectively,
Parent Contracts
) that is a Parent Material Contract;
(d) require any consent, approval or other authorization of, or filing with or notification to, any Person under any
Parent Material Contract;
(e) give rise to a right or result in any termination, cancellation, amendment,
modification or acceleration of any rights or obligations under any Parent Material Contract; or
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(f) cause the creation or imposition of any Liens on any assets of Parent or
its Subsidiaries, other than as would not reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect.
Section 4.9 Capitalization.
(a) As of the close of business on
June 13, 2011, (i) 185,535,45 Parent Ordinary Shares were issued and outstanding, including 14,941,400 Parent Ordinary Shares that were held in treasury by Parent and its Subsidiaries and (ii) 3,960,388 Parent Ordinary Shares were
held in the Employee Benefit Trust for issuance under Parents employee share plans set forth in Section 4.9(b) of the Parent Disclosure Letter (the
Parent Option Plans
).
(b) Since the close of business on June 13, 2011, no share capital of Parent, or securities convertible or
exchangeable into or exercisable for share capital of Parent, has been issued other than upon exercise of options over Parent Ordinary Shares (
Parent Share Options
) granted under the Parent Option Plans or share option plans
described in Section 4.9(f) below.
(c) All Parent Ordinary Shares that are issued and outstanding or are
subject to issuance under this Agreement, (i) are or, upon such issuance, will be duly authorized, validly allotted and issued, fully paid and nonassessable, free of any Liens, and issued in compliance with all applicable securities Laws and
(ii) were not or, when so issued, will not have been issued in violation of any pre-emptive rights or rights of first refusal created by Law or the organizational documents of Parent or any Contract to which Parent is otherwise bound.
Immediately following the Effective Time, each ADS will be exchangeable at the option of the holder for four (4) Parent Ordinary Shares. Following the Effective Time, the ADSs will be freely tradable on the NASDAQ Stock Market by the former
stockholders of the Company, except for the limitations imposed by Rule 144 on Affiliates of Parent.
(d) There
are no outstanding contractual obligations of Parent or any of its Subsidiaries (i) to repurchase, redeem or otherwise acquire any Parent Ordinary Shares or share capital of any Subsidiary of Parent or (ii) to make any investment in
(A) any Subsidiary of Parent that is not wholly-owned by Parent or (B) any other Person.
(e) All
outstanding share capital of each Subsidiary of Parent is duly authorized, validly allotted and issued and fully paid and was not issued in violation of any pre-emptive rights.
(f) As of the close of business on June 15, 2011, Parent Share Options to acquire an aggregate of 14,338,502 Parent
Ordinary Shares and performance share awards have been granted and are outstanding under the Parent Option Plans and employee equity award plans that were assumed by Parent in connection with the acquisition of SiRF Technology Holdings Inc. (the
SiRF Plans
). Other than such Parent Share Options granted under the Parent Option Plans and the SiRF Plans, there are no options, warrants, calls, conversion rights, share appreciation rights, phantom share awards, redemption
rights, repurchase rights or other rights, agreements, arrangements or commitments to which Parent or any of its Subsidiaries is a party whether under the Parent Option Plans, the SiRF Plans or otherwise (A) relating to the issued or unissued
share capital or other securities of Parent or any of its Subsidiaries or (B) obligating Parent or any of its Subsidiaries to issue or sell any of their share capital or other securities. As of the date of this Agreement, 2008 grants made under
the CSR Share Award Plan and the CSR Share Option Plan totaling in the aggregate 1,171,545 have lapsed (the
Lapsed Performance Awards
) and the underlying Parent Ordinary Shares will not have been issued. Neither the Lapsed
Performance Awards nor 2009 performance share awards in respect of 1,023,331 Parent Ordinary Shares were included in the number of Parent Ordinary Shares used in the calculations of diluted per share amounts in Parents Annual Report on Form
20-F for the year ended January 1, 2010.
(g) Parent has made available to the Company (i) correct
and complete copies of all Parent Option Plans and (ii) a correct and complete list of the following information, as of the date of the Original Agreement, with respect to each Parent Share Option: (A) the exercise price per Parent
Ordinary Share;
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(B) the number of Parent Ordinary Shares subject to such Parent Share Option; and (C) whether, as of the date of the Original Agreement, such Parent Share Option is vested.
Section 4.10 Voting.
(a) The Requisite Parent Vote and the adoption of this Agreement by the affirmative vote of the holders of a majority of the outstanding shares of Merger Sub are the only votes of the holders of any class
or series of the share capital of Parent or any of its Subsidiaries necessary (under the Parent Organizational Documents, the DGCL and the Companies Act 2006 ( the
Companies Act
), other applicable Laws or otherwise) to approve the
issuance of the ADSs and Parent Ordinary Shares underlying the ADSs, in connection with the Merger, to approve and adopt this Agreement, and to approve the Merger and the other transactions contemplated by this Agreement.
(b) Other than the Parent Voting Agreements, there are no voting trusts, proxies or similar agreements, arrangements or
commitments to which Parent or any of its Subsidiaries is a party or of which Parent has Knowledge with respect to the voting of any share capital of Parent or any of its Subsidiaries. There are no bonds, debentures, notes or other instruments of
indebtedness of Parent or any of its Subsidiaries that have the right to vote, or that are convertible or exchangeable into or exercisable for securities having the right to vote, on any matters on which shareholders of Parent may vote.
Section 4.11 Public Reports.
(a) Parent has made available to the Company correct and complete copies of, all circulars, notices, prospectuses, resolutions, reports (including annual financial reports, half yearly financial reports
and interim management statements) and other documents (including notifications to a RIS (as defined in the Listing Rules)) prepared by Parent since January 1, 2008, to which the Listing Rules and/or the prospectus rules made by the UKLA under
Part VI of the Financial Services and Markets Act 2000 (such rules the
Prospectus Rules
) and/or the disclosure rules and transparency rules made by the UKLA under Part VI of the Financial Services and Markets Act 2000
(such rules the
Disclosure and Transparency Rules
) apply (collectively, the
Parent U.K. Public Reports
). The Parent U.K. Public Reports (i) were prepared in accordance with the requirements of the UKLA and
other applicable Laws, (ii) timely filed with the UKLA and, if applicable, the Registrar of Companies (where the Parent U.K. Public Reports were required by Law or by the UKLA to be so filed), (iii) comprise the only circulars, notices,
prospectuses, resolutions, reports and other documents required by the UKLA to be filed or published by Parent since January 1, 2008 and (iv) in the case of Parent U.K. Public Reports which were required by Law or by the UKLA to so be
filed, did not, at the time they were filed, contain any untrue statement of a material fact or omit 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 such statements were made, not misleading. For the purposes of this Section 4.11(a) and this Agreement where appropriate, file and filing include in the case of Parent any announcement made or required to be made
to a regulatory information service.
(b) Parent has timely filed with the SEC, and has made available to the
Company correct and complete copies of, all forms, reports, schedules, statements and other documents required to be filed by Parent with the SEC since January 1, 2008 (collectively, the
Parent U.S. Public Reports
and,
together with the Parent U.K. Public Reports, the
Parent Public Reports
). The Parent U.S. Public Reports (i) were prepared in accordance with the requirements of the Securities Act and the Exchange Act and (ii) did not,
at the time they were filed, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which such
statements were made, not misleading.
(c) Neither Parent nor any of its Subsidiaries is a party to, or has any
commitment to become a party to, any off-balance sheet partnership or any Contract or arrangement relating to any transaction or relationship between or among Parent and 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, or any off-balance sheet arrangement (as defined in Item 303(a) of Regulation S-K of the SEC).
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(d) Each of the principal executive officers of Parent and the principal
financial officer of Parent (or each former principal executive officer of Parent and each former principal financial officer of Parent, as applicable) has made all certifications required by Rule 13a-14 or 15d-14 under the Exchange Act and
Sections 302 and 906 of the Sarbanes-Oxley Act with respect to the Parent U.S. Public Reports, and the statements contained in each such certification, at the time of filing or submission of such certification, were true and accurate. For
purposes of this Agreement, principal executive officer and principal financial officer shall have the meanings given to such terms in the Sarbanes-Oxley Act. Neither Parent nor any of its Subsidiaries has outstanding, or has
arranged any outstanding, extensions of credit to directors or executive officers in violation of Section 402 of the Sarbanes-Oxley Act. As of the date of the Original Agreement, Parent has no reason to believe that its outside
auditors and its principal executive officer and principal financial officer will not be able to give, without qualification, the certificates and attestations required pursuant to the Sarbanes-Oxley Act when next due.
(e) No Subsidiary of Parent is required to file reports or other documents pursuant to the Listing Rules and/or the
Prospectus Rules and/or the Disclosure and Transparency Rules or is otherwise required to file any forms, reports, schedules, statements or other documents with the UKLA, any other Governmental Entity (whether or not located in the United Kingdom)
that performs a similar function to that of the UKLA or any securities exchange or quotation service.
Section 4.12 Disclosure
Controls and Procedures.
(a) Parent keeps adequate accounting records which disclose with reasonable accuracy
at any time its financial position as required by §386 of Companies Act 2006 of the UK. Parent has taken reasonable steps (i) to establish procedures which provide a reasonable basis for them to make proper judgments on an ongoing basis as
to the financial position and prospects of Parent and its group and (ii) to maintain a sound system of internal control including financial, operational and compliance controls and risk management systems, as required by the Listing Rules and
the Combined Code on Corporate Governance in respect the period up to and including June 28, 2010 and the UK Corporate Governance Code issued by the Financial Reporting Council dated June 2010 for the period from and including June 29,
2010 (the
UK Corporate Governance Code
).
(b) Parent has, prior to the preparation of its
annual accounts (as defined in the Companies Act), disclosed to Parents auditor all information needed by Parents auditor to prepare its auditors report on Parents annual accounts.
(c) Parent (i) maintains disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)
under the Exchange Act) to provide reasonable assurance that material information relating to Parent, including its consolidated subsidiaries, is made known to its principal executive officer and principal financial officer; (ii) maintains
designed internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act); and (iii) evaluated the effectiveness of the Companys disclosure controls and procedures as required by
Rule 13a-15(a) under the Exchange Act.
(d) Parent has disclosed, based on the most recent evaluation of
internal control over financial reporting, to Parents auditors and the audit committee of Parents board of directors all significant deficiencies and material weaknesses (each as defined in Rule 12b-2 under the
Exchange Act) in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect Parents ability to record, process, summarize and report financial information. To the Knowledge of Parent,
there is no fraud, whether or not material, that involves management or other employees who have a significant role in the Parents internal control over financial reporting.
(e) Since January 1, 2008, (i) neither Parent nor, to the Knowledge of Parent, any director or officer of Parent
has received or otherwise had or obtained Knowledge of any written material complaint, allegation, assertion or claim regarding the accounting or auditing practices, procedures, methodologies or methods of Parent or any of its Subsidiaries, or their
respective internal accounting controls, including any written material complaint, allegation, assertion or claim that Parent or any of its Subsidiaries has engaged in
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accounting or auditing practices that do not comply with IFRS or Parents published internal accounting controls, and (ii) no attorney representing Parent or any of its Subsidiaries,
whether or not employed by Parent or any of its Subsidiaries, has rendered a report to the board of directors of Parent or any committee thereof containing evidence of a material violation of applicable securities Laws, breach of fiduciary duty or
similar violation by Parent or any of its officers or directors.
Section 4.13 Financial Statements. Parent has delivered
to the Company a correct and complete copy of the 2010 Parent Financial Statements. The 2010 Parent Financial Statements and the other audited consolidated financial statements and unaudited consolidated interim financial statements of Parent
included in the Parent U.S. Public Reports: (a) complied as to form in all material respects with applicable Laws in effect at the time of filing; (b) were prepared in accordance with IFRS (except, in the case of unaudited statements, as
permitted by applicable Laws) applied on a consistent basis (except as may be indicated in the notes to those financial statements); and (c) give a true and fair view, in accordance with IRFS, of the state of the affairs of Parent and its
Subsidiaries as of the dates thereof and the profit of Parent and its Subsidiaries for the periods indicated (subject, in the case of any unaudited interim financial statements, to normal year-end adjustments and the absence of footnotes).
Section 4.14 Liabilities. There are no Liabilities of Parent or any of its Subsidiaries which are required to be
reflected or reserved against on a consolidated balance sheet of Parent, including the notes thereto, under IFRS, other than: (a) Liabilities reflected or reserved against in the consolidated balance sheet of Parent and its consolidated
Subsidiaries as of December 31, 2010 and the notes thereto set forth in the 2010 Parent Financial Statements; (b) Liabilities incurred since December 31, 2010 in the ordinary course of business consistent with past practice that would
not reasonably be expected to have individually or in the aggregate a Parent Material Adverse Effect; (c) Liabilities or obligations incurred directly pursuant to this Agreement; and (d) any other Liabilities that would not reasonably be
expected to have, individually or in the aggregate, a Parent Material Adverse Effect.
Section 4.15 Absence of Certain
Changes. Since December 31, 2010, there has not been any Parent Material Adverse Effect. Except for Liabilities incurred in connection with this Agreement, since December 31, 2010, (a) Parent and each of its Subsidiaries have
conducted their business in the ordinary course consistent with past practice and (b) neither Parent nor any of its Subsidiaries has taken any action, which, if taken after the date of the Original Agreement, would be prohibited by
Section 5.2.
Section 4.16 Litigation. There are no material Legal Actions pending or, to the Knowledge of Parent,
threatened against Parent or any of its Subsidiaries or any director, officer or employee of Parent or any of its Subsidiaries or other Person for whom Parent or any of its Subsidiaries may be liable. There are no material Orders outstanding against
Parent or any of its Subsidiaries.
Section 4.17 Contracts.
(a) Section 4.17 of the Parent Disclosure Letter sets forth, as of the date of the Original Agreement, a list of:
(i) all Parent Contracts required to be described in, or filed as an exhibit to, any Parent Public Report that
are not so described or filed as required by the Securities Act or the Exchange Act, as the case may be;
(ii)
all Parent Contracts that, to the Knowledge of Parent (x) impose any material limitations, restrictions or penalties on Parents manufacture, sale or distribution of any current or future Parent Product or a material aspect of
Parents business, or which after the Effective Time could impose similar restrictions on the Company or any of its Subsidiaries, with respect to any of their respective products or services or a material aspect of the operation of their
businesses, or (y) grant the other party to such Parent Contract or a third party most favored nation pricing or terms that would, following the Effective Time, apply to the Surviving Corporation or any of its Subsidiaries;
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(iii) all material Parent Contracts providing for (A) indemnification
(including with respect to Intellectual Property Rights) or (B) any material guaranty of third party obligations, in each of the foregoing cases entered into outside the ordinary course of business;
(iv) all material Parent Contracts relating to revenue or profit-sharing joint ventures (whether in partnership, limited
liability company or other organizational form);
(v) all Parent Contracts with any Governmental Entity (other
than ordinary course customer Contracts providing for payments below $1,000,000 and pursuant to which the counterparty does not have any rights to Parents or its Subsidiaries products or services or Parent Intellectual Property Rights other
than its rights to use the products or services sold under such Parent Contract as a customer);
(vi) all
Parent Contracts entered into in the last five years in connection with the settlement or other resolution of any Legal Action that has any material continuing obligation, liability or restriction on the part of Parent or any of its Subsidiaries;
(vii) (A) all revenue-generating Parent Contracts that were entered into after January 1, 2009 or were
entered into before January 1, 2009 and remain in effect with the ten largest customers of Parent and its Subsidiaries (determined on the basis of revenues received by Parent or any of its Subsidiaries in the fiscal year ended December 31,
2010) and that have material, known, unfulfilled obligations, and (B) to the extent not disclosed pursuant to clause (viii)(A), the ten largest revenue generating Parent Contracts (determined on the basis of revenues received by Parent or any
of its Subsidiaries in the fiscal year ended December 31, 2010);
(viii) all Parent Contracts that were
entered into after January 1, 2009 or were entered into before January 1, 2009 and remain in effect with the ten largest suppliers to Parent and its Subsidiaries (determined on the basis of amounts paid by Parent or any of its Subsidiaries
in the fiscal year ended December 31, 2010) and that have material, known, unfulfilled obligations on behalf of the supplier.
The Parent Contracts referred to in clauses (i) through (viii) of this Section 4.17(a) and the Parent IP Contracts are collectively referred to in this Agreement as Parent Material
Contracts. Parent has made available to the Company or its Representatives correct and (except for redaction of certain information in certain Parent Contracts) complete copies of all Parent Material Contracts.
(b) Except for such matters as would not, individually or in the aggregate, reasonably be expected to be material to
Parent and its Subsidiaries, taken as a whole, (i) all Parent Material Contracts are valid and binding, in full force and effect and enforceable in accordance with their respective terms, except as may be limited by the Bankruptcy and Equity
Exception, (ii) neither Parent nor any of its Subsidiaries is in violation or breach of, or in default (with or without notice or the lapse of time or both) under, any Parent Material Contracts and, (iii) to the Knowledge of Parent, no
other Person is in material violation or breach of, or in default (with or without notice or the lapse of time or both) under, any Parent Material Contracts.
Section 4.18 Pension Plans.
(a) Section 4.18(a) of the
Parent Disclosure Letter lists all material:
(i) occupational and personal pension schemes under which any
current or former director, officer, employee or consultant of Parent or any of its Subsidiaries (each a
Relevant Employee
) or for the widow, widower, civil partner, child or dependent of any Relevant Employee (each a
Relevant Employee Dependent
) has any right to benefits and which are or have been maintained or contributed to by Parent or any of its Subsidiaries or to which Parent or any of its Subsidiaries makes or is or has been required to
make contributions with respect to such Relevant Employees (all such schemes are collectively referred to as the
Parent Pension Plans
); and
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(ii) life assurance schemes under which any Relevant Employee or Relevant
Employee Dependent has any right to benefits and which are maintained or contributed to by Parent or any of its Subsidiaries or to which Parent or any of its Subsidiaries makes or is or has been required to make contributions with respect to such
Relevant Employees. All such plans are collectively referred to as the
Parent Life Plans
.
(b) With respect to each Parent Pension Plan to which Parent contributes, Parent has made available (i) a true and
complete copy of the members booklet, (ii) a list of all employees in respect of whom Parent was contributing as at December 31, 2010, and (iii) the present rates of contribution to the Parent Pension Plan as a percentage of
pensionable salary for employers and employees. Parent does not have any liability for the provision of any pension, retirement death, incapacity, sickness, disability, accident or other like benefit (including the payment after leaving employment
of the Parent or any of its Subsidiaries of medical expenses), whether under any Parent Pension Plan or otherwise, other than is expressly disclosed in Section 4.18(b) of the Parent Disclosure Letter and will not enter into any scheme,
agreement or arrangement for the provision of such benefits before the Effective Time.
(c) Each Parent Pension
Plan, and (in relation to eligibility to join and employer contributions to each Parent Pension Plan) the Parent and each Subsidiary, is in compliance in all material respects with all applicable Laws, including Article 141 (formerly Article 119) of
the Treaty of Rome. Each Parent Pension Plan that is intended to be a registered scheme for HM Revenue & Customs purposes has been so registered and no event has occurred since the date of such registration that would materially adversely
affect such registration.
(d) No Parent Pension Plan or Parent Life Plan provides death benefits to current or
former employees of Parent or any of its Subsidiaries that are not insured.
(e) The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby will not increase any benefits otherwise payable under any Parent Pension Plan. Neither the Parent nor any of its Subsidiaries has given any legally enforceable undertaking
or assurance as to the continuance, introduction, improvement or increase of any benefit of a kind described in Section 4.18(a) or Section 4.18(b) as to the rights of any Relevant Employee or Relevant Employee Dependent to receive such
benefits and will not do so before the Effective Date.
(f) There are no current pending or, to the Knowledge
of Parent, threatened material claims or litigation against or relating to any Parent Pension Plan (including complaints to the Pensions Ombudsman and complaints under any internal disputes resolution procedure and action issued by the UK Pensions
Regulator) other than ordinary claims for benefits by participants and beneficiaries.
(g) No employee of
Parent or any Subsidiary came to his current employment in consequence of a transfer under the Transfer of Undertakings (Protection of Employment) 2006 or 1981, in relation to which any transferring employee, while he was employed by the transferor
employer, had rights to any benefits calculated in accordance with a formula which takes account of the service of the member to retirement, death or withdrawal and the present or historic remuneration of the member (
Defined
Benefits
) that the Parent or any Subsidiary became or may become obliged to provide as a result of the transfer.
(h) Neither Parent nor any Subsidiary is or has been an employer of or an associate or connected party (within the meaning of Sections 435 and 429 of the Insolvency Act 1986) of an employer of any
pension scheme that provides for Defined Benefits and to which it is likely that Parent or any of its Subsidiaries will be liable to contribute.
(i) Neither Parent nor any Subsidiary has any commitment or obligation to provide, or contribute to, any retirement benefit for any person other than the requirement to make monthly contributions under
the Parent Pension Plans. No target or defined benefit has been promised or offered by the Parent or any Subsidiary to any employee, under any Parent Pension Plan or otherwise, other than lump-sum death in service benefits.
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Section 4.19 Labor Relations.
(a) Neither Parent nor any of its Subsidiaries (i) recognizes any trade union in respect of its employees and, to the
Knowledge of Parent, no union organizing efforts have been conducted within the last three years or are now being conducted, (ii) is a party to any material collective bargaining agreement or other labor contract, and (iii) currently has,
or, to the Knowledge of Parent, is there now threatened, a strike, picket, work stoppage, work slowdown or other organized labor dispute that would reasonably be expected to be, individually or in the aggregate, material to Parent and its
Subsidiaries, taken as a whole. Parent is not a party to, or otherwise bound by, any material consent decree with, or citation or other material order, injunction, judgment, doctrine, decree, ruling, writ, assessment or arbitration award of any
Governmental Entity relating to employees or employment practices.
(b) Each of Parent and its Subsidiaries is
in compliance in all material respects with all applicable Laws relating to the employment of labor, including all applicable Laws relating to wages, hours, collective bargaining, employment discrimination, civil rights, safety and health,
workers compensation, pay equity and the collection and payment of withholding and/or social security taxes, and neither Parent nor any of its Subsidiaries has incurred any material liability or obligation under the Worker Adjustment and
Retraining Notification Act or any similar state or local Law within the last six months that remains unsatisfied.
Section
4.20 Taxes.
(a) All Tax Returns required to be filed by or with respect to Parent or any of its Subsidiaries
have been timely filed, and all such Tax Returns are true, complete and correct in all material respects, except for Tax Returns as to which the failure to so file or be so true, complete and correct would not reasonably be expected to have,
individually or in the aggregate, a Parent Material Adverse Effect.
(b) Parent and its Subsidiaries have fully
and timely paid all material Taxes shown to be due on the Tax Returns referred to in Section 4.20(a).
(c)
There are no outstanding agreements extending or waiving the statutory period of limitations applicable to any claim for, or the period for the collection, assessment or reassessment of, Taxes due from Parent or any of its Subsidiaries for any
taxable period and no request for any such waiver or extension is currently pending, except for such agreements or requests that would not reasonably be expected to be, individually or in the aggregate, a Parent Material Adverse Effect.
(d) No audit or other proceeding by any Governmental Entity is pending or, to the Knowledge of Parent, threatened in
writing with respect to any Taxes due from or with respect to Parent or any of its Subsidiaries, except for such audits or proceedings that would not reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect.
(e) All deficiencies for Taxes asserted or assessed in writing against Parent or any of its Subsidiaries have
been fully and timely paid, settled or properly reflected in the most recent financial statements contained in the Parent Public Reports, except for such deficiencies that would not reasonably be expected to have, individually or in the aggregate, a
Parent Material Adverse Effect.
(f) Neither Parent nor any of its Subsidiaries will be required to include in
a taxable period ending after the Closing Date material taxable income attributable to income that accrued in a taxable period prior to the Closing Date but was not recognized for Tax purposes in such prior taxable period (other than as properly
reflected in Parents financial statements as reserves) as a result of the installment method of accounting, the completed contract method of accounting, the long-term contract method of accounting, the cash method of accounting,
Section 481 of the Code, or otherwise.
(g) The consummation of the Merger will not result in the
repayment or clawback of any governmental grants, Tax incentives or other similar benefits applicable to Parent or its Subsidiaries (
Parent Tax
Incentives
) attributable to any period (or portion thereof) ending on or before
the Closing Date, or the reduction or elimination of such Parent Tax Incentives for any period (or portion thereof) beginning on or after the Closing Date.
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(h) Neither Parent nor any of its Subsidiaries organized under the laws of
the United Kingdom has claimed a repayment or credit for any amount in respect of value added Tax for which it was not entitled to claim a repayment or credit.
(i) Schedule 4.20(j) of the Parent Disclosure Letter lists all pending and outstanding grants, incentives, qualifications and subsidies from the government of the United Kingdom or any governmental,
regulatory, administrative or quasi-governmental authority, agency or commission, or judicial or arbitral body of the United Kingdom, and any outstanding application to receive the same filed by the Parent or its Subsidiaries (collectively,
UK Government Grants
). Parent and its Subsidiaries, as applicable, are entitled to claim all such UK Government Grants.
(j) Each of Parent and its Subsidiaries are in compliance in all material respects with all conditions and requirements stipulated by the instruments of approval granted to them with respect to the UK
Government Grants. Neither Parent nor any of its Subsidiaries has received any notice of any proceeding or investigation relating to the revocation or modification of any such UK Government Grant, except where such revocation or modification would
not reasonably be expected to be, individually or in the aggregate, material to Parent and its Subsidiaries, taken as a whole. All information supplied by Parent and its Subsidiaries with respect to the applications relating to such UK Government
Grants was true, correct and complete in all material respects when supplied to the appropriate authorities.
Section 4.21
Environmental Matters. Since January 1, 2006, the operations of Parent and each of its Subsidiaries have complied in all material respects and currently comply in all material respects with applicable Environmental Laws, and, to the
Knowledge of Parent, Parent and each of its Subsidiaries complied in all material respects with applicable Environmental Laws prior to January 1, 2006. Parent and its Subsidiaries possess all Environmental Permits necessary for their respective
operations, and (i) such operations are in compliance in all material respects with applicable Environmental Permits; (ii) all such Environmental Permits are in full force and effect in all material respects; (iii) no suspension or
cancellation of any of the Environmental Permits is pending or, to the Knowledge of Parent, threatened; and (iv) no such suspension or cancellation of such Environmental Permits will result from the transactions contemplated by this Agreement.
To the Knowledge of the Parent, neither the Parent nor any Subsidiary has entered into any agreement (other than Parent Leases) that may require it to guarantee, reimburse, pledge, defend, hold harmless or indemnify any other party with respect to
liabilities arising out of Environmental Laws or Hazardous Substances. Except as would not reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect, no material claim, suit or proceeding arising under or
pursuant to Environmental Laws is pending, or to the Knowledge of Parent, threatened in writing against Parent or any of its Subsidiaries. Except as would not reasonably be expected to have, individually or in the aggregate, a Parent Material
Adverse Effect, to the Knowledge of Parent, no condition exists on any property, currently or formerly, owned or operated by Parent that has given rise to, or would reasonably be expected to give rise to, any liability or obligation under
Environmental Laws. This Section 4.21 shall be the only representation made by Parent with respect to Environmental Laws, Environmental Permits, Hazardous Substances or actual or potential cleanup, remediation, removal or other response costs
(including the cost of coming into compliance with Environmental Laws), investigation costs (including fees of consultants, counsel and other experts in connection with any environmental investigation, testing, audits or studies), losses,
Liabilities, payments, Damages (including any actual, punitive or consequential damages (A) under any Environmental Laws, contractual obligations or otherwise or (B) to third parties for personal injury or property damage), civil or
criminal fines or penalties, judgments or amounts paid in settlement, in each case arising out of or relating to any obligation or liability under any Environmental Laws.
Section 4.22 Intellectual Property.
(a) All material Intellectual
Property Rights owned or purported to be owned by Parent or its Subsidiaries (the
Parent Intellectual Property Rights
), are owned solely by Parent or one of its Subsidiaries and are free and clear of any material Liens. To the
Knowledge of Parent, the Registered Parent IP that have been issued or registered are valid and enforceable.
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(b) Section 4.22(b) of Parent Disclosure Letter sets forth, as of the
date of the Original Agreement, a correct and complete list of all IP Registrations for any Parent Intellectual Property Rights (
Registered Parent IP
), specifying as to each item, as applicable: (i) the title of the item;
(ii) the owner of the item; (iii) the jurisdictions in which the item is registered, issued or in which an application for registration or issuance has been filed; and (iv) the registration, issuance or application numbers and dates.
(c) Section 4.22(c), Part 1, of the Parent Disclosure Letter sets forth, as of the date of the Original
Agreement, a correct and complete list of all Contracts (collectively the
Parent IP Contracts
) (i) under which Parent or any of its Subsidiaries has licensed expressly granted a license (including by means of a covenant not
to sue or similar covenant) with respect to any material Parent Intellectual Property Rights, other than non-exclusive licenses granted in the ordinary course of business or that are not material to the business of the Parent or its Subsidiaries
(
Parent Out-Licenses
), and (ii) under which Parent or any of its Subsidiaries has expressly been granted any license (including by means of a covenant not to sue or similar covenant) from a third party with respect to any
material Intellectual Property Rights, other than Off-the-Shelf Software or other licenses to Software that is generally commercially available for license from third parties for a fee of less than $500,000 (
Parent In-Licenses
).
Section 4.22 of the Parent Disclosure Letter lists all those Parent In-Licenses that will require the consent of a third party in order for such Parent In-Licenses to not terminate and to survive the consummation of transactions contemplated by
this Agreement (alone or in combination with any other event) for the benefit of the Parent, its Subsidiaries and the Surviving Corporation. Except as set forth in Section 4.22(c), Part 2, of the Parent Disclosure Letter, the execution and
delivery of this Agreement by Parent and the consummation by Parent of the transactions contemplated by this Agreement do not and will not (i) conflict with, or result in any violation or breach of, or default (with or without notice or lapse
of time, or both) under, any Parent IP Contract, (ii) give rise to a right of or result in any termination, cancelation or acceleration of any material right or material obligation set forth in any Parent IP Contract, (iii) result in a
loss of a material benefit to Parent or any of Parents Subsidiaries (other than the Company or the Merger Sub, following the Effective Date), as the case may be, under any Parent IP Contract, (iv) result in the creation of any Lien in or
upon any material Parent Intellectual Property Rights, (v) give rise to any increased, additional, accelerated or guaranteed material rights, entitlements, licenses relating to material Parent Intellectual Property Rights, or (vi) result
in or require the Company or any of its Subsidiaries to grant any rights or license (including by means of a covenant not to sue or similar covenant) with respect to any of their respective Intellectual Property Rights or impose any limitations or
restrictions on the conduct of their respective business or operations; except in the case of the foregoing subparagraphs (i)-(vi) would not have, or be expected to have, a material adverse impact on the Parent, and of its Subsidiaries or any
material Parent Product or line of business.
(d) To the Knowledge of Parent, no Open Source Materials, were
used in, incorporated into, integrated, distributed or bundled with any Parent Product sold or distributed by the Parent or any of its Subsidiaries in a manner that would subject any Parent Product, or any other Software of the Parent or its
Subsidiaries, to the terms of any Open Source License. To the Knowledge of Parent, no Parent Product is subject to any Open Source License or is sold or distributed by the Parent or any of its Subsidiaries as Open Source Materials.
(e) All material Parent Intellectual Property Rights were either (i) developed or created by the employee or
consultant of Parent or a Subsidiary of the Parent within the scope of his or her employment or consultancy or (ii) otherwise were the subject of an enforceable Contract concerning the assignment or vesting of ownership of such Intellectual
Property Rights in the Parent or a Subsidiary of Parent and that included obligations of confidentiality of such Person to the Parent or a Parent Subsidiary. All amounts payable by or due Parent to all Persons, including current and former
employees, involved in the research, development, conception or reduction to practice of any material Parent Intellectual Property Rights have been paid to the extent that any such amount is due as of the date of the Original Agreement.
(f) Neither Parent nor any of its Subsidiaries has received any funding from any Governmental Entity (including, for
example, funding from OCS) or any university, government-owned entity, college, other educational institution or other not-for-profit for the development of any material Parent Intellectual
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Property Rights or Parent Technology. No material Parent Intellectual Property Rights or Parent Technology is subject to any restrictions with respect to the use, transfer, licensing or export as
a result of (i) any funding the Company or any of its Subsidiaries received from any Governmental Entity or (ii) any restrictions imposed by the Encouragement of Research and Development in Industry Law, 5744-1984, as amended, the Law for
the Encouragement of Capital Investments, 1959, or any regulations and contractual obligations imposed in connection therewith. No facilities of a Governmental Entity, university, government-owned institution, college, other educational institution
or other not-for profit company was used in the development of any of the material Parent Intellectual Property Rights owned, in whole or in part, by Parent or any of its Subsidiaries. To the Knowledge of Parent, no current or former employee,
consultant or independent contractor of Parent or any of its Subsidiaries who is or was involved in, or who has or will have contributed to, the creation or development of any material Parent Intellectual Property Rights has performed services for,
or was an employee of, or was otherwise engaged (including as a graduate student) by any Government Entity, university, government-owned institution, college, other educational institution or other not-for-profit companies while such employee,
consultant or independent contractor was also performing services for Parent or any of its Subsidiaries and, solely or together with others, invented, developed, or created or was involved in creation or development of any material Parent
Intellectual Property Rights.
(g) Neither Parent nor any of its Subsidiaries or any of their respective
employees has, with authorization of Parent and on its behalf or on behalf of its Subsidiaries, participated in, participates in, or is or was a member of any, organization, body or group that is involved in setting, publishing or developing any
industry standards applicable to Parent Products in a manner that (i) places any restrictions on, or requirement with respect to, the licensing or enforcement of any material Parent Intellectual Property Rights or (ii) after the
consummation of the transactions contemplated by this Agreement, will place any material restrictions on or any requirement with respect to the licensing or enforcement of any material Parent Intellectual Property Rights owned by Company or its
Subsidiaries. Neither Parent nor any of its Subsidiaries has agreed to, or is otherwise obligated or required to, license any Parent Intellectual Property Rights to any third party, or is required to grant licenses on RAND or FRAND or ZRAND terms.
(h) To the Knowledge of Parent, neither the Parent Products nor the conduct of the business of Parent and its
Subsidiaries, infringes, misappropriates or otherwise violates any Intellectual Property Rights of any other Person in a manner that has resulted in or is reasonably expected to result in a material liability to the Parent or materially adversely
affect the Parent or the Parent Products. No material claims have been received in writing by the Company within the previous three (3) years against Parent or any of its Subsidiaries or, to Parents Knowledge, against any third party to
whom Parent or any of its Subsidiaries has an indemnification obligation, alleging that any Parent Product, or the conduct of the business of Parent or any of its Subsidiaries, infringes, misappropriates or otherwise violates any Intellectual
Property Rights of any Person. No claims are pending, or have been made within the three (3) years prior to the date of the Original Agreement, by Parent or any of its Subsidiaries against a third party alleging that such third party infringes,
misappropriates or otherwise violates any material Parent Intellectual Property Rights.
Section 4.23 Real Property;
Personal Property.
(a) Parent and its Subsidiaries have good and legal title to, or have a valid and
enforceable right to use or a valid and enforceable leasehold interest in, all real property (including all buildings, fixtures and other improvements thereto) used by them. None of Parents and any of its Subsidiaries ownership of or
leasehold interest in any such property is subject to any material Lien.
(b) Section 4.23(b) of the
Parent Disclosure Letter sets forth, as of the date of the Original Agreement, a list (identifying the names of the parties, the term, the address and the use thereof) of each of the leases, subleases and other agreements under which Parent or any
of its Subsidiaries uses or occupies or has the right to use or occupy, now or in the future, any real property (
Parent Leases
), and Parent has made available to the Company correct and complete copies of each material Parent
Lease. Each material Parent Lease is valid, binding and enforceable, subject to the Bankruptcy and Equity Exception, and to the
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Knowledge of Parent, no termination event or condition or uncured default on the part of Parent or any such Subsidiary exists under any material Parent Lease.
(c) Parent and its Subsidiaries have good and legal title to, or a valid and enforceable leasehold interest in, all
material personal assets used by them sufficient to conduct their respective businesses as currently conducted, except where the failure to have such title to or interest in such assets would not reasonably be expected to be material to Parent and
its Subsidiaries, taken as a whole. None of Parents and any of its Subsidiaries ownership of or leasehold interest in any such personal assets is subject to any material Liens.
(d) Parent or its Subsidiaries currently occupy all of the sites leased under the Parent Leases (the
Parent
Facilities
) for the operation of their business, and there are no other parties occupying, or with a right to occupy, any of the Parent Facilities. The Parent Facilities are in condition and repair suitable for the conduct of the business
as presently conducted therein, except where the failure to be in such suitable condition and repair would not reasonably be expected to be material to Parent and its Subsidiaries, taken as a whole. Neither Parent nor any of its Subsidiaries could
reasonably be required to expend more than $250,000 in causing any Parent Facilities to comply with the surrender conditions set forth in the applicable Parent Lease.
Section 4.24 Permits; Compliance with Laws.
(a) Each of Parent
and its Subsidiaries is in possession of all material Permits necessary for it to own, lease and operate its properties and assets or to carry on its business as it is now being conducted (collectively, the
Parent Permits
), and
all such Parent Permits are in full force and effect in all material respects. No suspension or cancellation of any of the Parent Permits is pending or threatened, and no such suspension or cancellation will result from the transactions
contemplated by this Agreement, except for any suspensions or cancellations that, individually or in the aggregate, would reasonably be expected to be material to Parent and its Subsidiaries, taken as a whole.
(b) Neither Parent nor any of its Subsidiaries is in conflict in any material respect with, or in default or material
violation of, (i) any Laws applicable to Parent or such Subsidiary or by which any of their assets are bound or (ii) any Parent Permits.
(c) No representation is made under this Section 4.24 with respect to employee benefits, labor or environmental matters, which matters are addressed in Section 4.18, Section 4.19 and
Section 4.21, respectively.
Section 4.25 Unlawful Payments. To the Knowledge of Parent, neither Parent nor any of
its Subsidiaries, nor any director or officer of Parent has made, directly or indirectly, any (a) bribe or kickback, (b) unlawful payment or political contribution from corporate funds to governmental officials or political parties for the
purpose of influencing their actions or the actions of the Governmental Entity which they represent or (c) unlawful payment from corporate funds to obtain or retain any business.
Section 4.26 Insurance. Parent and its Subsidiaries have made accurate summaries of their material insurance policies available to
the Company.
Section 4.27 Brokers and Finders. No broker, finder or investment banker other than J.P. Morgan Cazenove
and N.M. Rothschild & Sons Limited is entitled to any brokerage, finders or other fee or commission in connection with the Merger or the other transactions contemplated by this Agreement based upon arrangements made by or on behalf of
Parent or any of its Subsidiaries.
Section 4.28 Interim Operations of Merger Sub. Merger Sub was formed solely for the
purpose of engaging in the transactions contemplated by this Agreement and owns no assets and has not engaged in any business activities or conducted any operations other than in connection with the transactions contemplated by this Agreement.
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Section 4.29 Information. To the Knowledge of Parent, none of the information to be
supplied by Parent or Merger Sub for inclusion or incorporation by reference in the Proxy Statement or the Form F-4 Registration Statement will, in the case of the Form F-4 Registration Statement, at the time it becomes effective and at the
Effective Time, contain any untrue statement of a material fact required to be stated in that Form F-4 Registration Statement or omit to state any material fact necessary to make the statements in that Form F-4 Registration Statement, in light of
the circumstances in which they are made, not misleading, or, in the case of the Proxy Statement or any amendments of or supplements to the Proxy Statement and at the time of the Company Stockholders Meeting, contain any untrue statement of a
material fact or omit to state any material fact required to be stated in that Proxy Statement or necessary in order to make the statements in that Proxy Statement, in light of the circumstances under which they are made, not misleading. The Proxy
Statement (except for those portions of the Proxy Statement that relate only to the Company and its Subsidiaries) and the Form F-4 Registration Statement will comply as to form in all material respects with the provisions of the Exchange Act and the
Securities Act, respectively.
Section 4.30 No Knowledge of Company Material Adverse Effect. Assuming the accuracy of the
representations and warranties of the Company set forth in Article III hereof, Parent has no Knowledge, as of the date hereof, of the occurrence of a Company Material Adverse Effect.
Section 4.31 Compliance with Original Agreement Covenants. Parent has not failed to comply with any obligation required to be performed
by it under the Original Agreement at or prior to the date hereof.
Section 4.32 No Other Representations or
Warranties. Except for the representations and warranties contained in this Agreement, neither Parent nor any other person (i) makes any representation or warranty express or implied, including any implied representation or warranty, as to
condition, merchantability, suitability or fitness for a particular purpose of any of the assets used in the business of or held by Parent or any of its Subsidiaries, (ii) makes any representation or warranty, express or implied, as to the
accuracy or completeness of any information regarding Parent or any of its Subsidiaries or the business conducted by Parent or any of its Subsidiaries, in each case except as expressly set forth in this Agreement or as and to the extent required by
this Agreement to be set forth in the Parent Disclosure Letter or (iii) makes any representation or warranty of any kind, express or implied, with respect to any projections, forecasts or other estimates, plans or budgets of future revenues,
expenses or expenditures, future results of operations (or any component thereof), future cash flows (or any component thereof) or future financial condition (or any component thereof) of Parent or any of its Subsidiaries or the future business,
operations or affairs of Parent or any of its Subsidiaries heretofore or hereafter delivered to or made available to the Company or its Representatives or Affiliates.
ARTICLE V
COVENANTS
Section 5.1 Conduct of Business of the Company. Except as contemplated by this Agreement, the Company shall, and shall cause each of
its Subsidiaries to, (x) conduct its operations in the ordinary course of business consistent with past practice and (y) use commercially reasonable efforts to maintain and preserve intact its business organization, to retain the services
of its current officers and key employees, and to preserve the good will of its customers, suppliers and other Persons with whom it has business relationships. Without limiting the generality of the foregoing, and except as otherwise contemplated by
this Agreement, required by Law (to the extent so required) or set forth in Section 5.1 of the Company Disclosure Letter (or any letter agreement between the Company and Parent entered into after the date of the Original Agreement and prior to
the date hereof with respect to this Section 5.1), the Company shall not, and shall not permit any of its Subsidiaries to, take any of the following actions, without the prior written consent of Parent (not to be unreasonably withheld,
conditioned or delayed):
(a) amend any of the Company Organizational Documents;
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(b) make, declare or pay any dividend or distribution on any shares of its
capital stock, other than dividends paid by wholly-owned Subsidiaries;
(c) (i) adjust, split, combine or
reclassify its capital stock, (ii) redeem, purchase or otherwise acquire, directly or indirectly, any shares of its capital stock or any securities convertible or exchangeable into or exercisable for any shares of its capital stock,
(iii) grant any Person any right or option to acquire any shares of its capital stock, (iv) issue, deliver or sell any shares of its capital stock or any securities convertible or exchangeable into or exercisable for any shares of its
capital stock or such securities (other than (A) pursuant to the exercise of the Company Stock Options or vesting of Company RSUs and restricted stock awards that were outstanding as of the date of the Original Agreement, (B) any such
securities issued in compliance with the Original Agreement or Section 5.1(d) or (C) pursuant to the ESPP in accordance with its terms) or (v) enter into any Contract, understanding or arrangement with respect to the sale, voting,
registration or repurchase of its capital stock;
(d) (i) increase the compensation or benefits payable or
to become payable to any of its directors, officers or employees, (ii) pay any compensation or benefits other than in the ordinary course of business pursuant to any existing plan or arrangement (including the granting, amending or repricing of
stock options, stock appreciation rights, shares of restricted stock or performance units) to its directors, officers or employees, (iii) grant any severance or termination pay to any of its directors, officers or employees (except pursuant to
existing Company Benefit Plans), (iv) enter into any new employment or severance agreement with any of its directors, officers or employees or (v) establish, adopt, enter into, amend in any material respect or take any action to accelerate
rights under, any Company Benefit Plans, except in each case (A) for increases in salary, wages and benefits (other than grants of Company Stock Options or Company RSUs) of officers or employees consistent with past practice, (B) in
conjunction with new hires, promotions or other changes in job status consistent with past practice (in respect of salary, wages and benefits, other than grants of Company Stock Options or Company RSUs) or (C) pursuant to existing collective
bargaining agreements or other Contracts that have been made available to Parent;
(e) acquire, by merger,
consolidation, acquisition of equity interests or assets, or otherwise, any business or any corporation, partnership, limited liability company, joint venture or other business organization or division thereof;
(f) sell, lease, license, transfer, pledge, encumber, grant or dispose of (i) any material Company Intellectual
Property Rights or (ii) any other assets of the Company or its Subsidiaries, including the capital stock of Subsidiaries of the Company, that are material to the Company and its Subsidiaries, taken as a whole, other than the licensing of
Company Intellectual Property Rights in connection with the sale or license of products or services to customers, the sale of inventory or the disposition of used or excess equipment, in each case in the ordinary course of business consistent with
past practice;
(g) Subject to Section 5.4, other than in the ordinary course of business, (i) enter
into any Company Material Contract or (ii) terminate, cancel or amend in any material respect any such Company Material Contract;
(h) other than in the ordinary course of business consistent with past practice (i) incur, assume or prepay any indebtedness, or (ii) assume, guarantee, endorse or otherwise become liable or
responsible for the obligations of any other Person;
(i) (i) make any loans, advances or capital
contributions to, or investments in, any other Person, other than in the ordinary course of business consistent with past practice, or (ii) make any loans to its directors or officers;
(j) make any capital expenditure, other than capital expenditures that are not, in the aggregate, for any fiscal year, in
excess of the Companys actual capital expenditures for 2010;
(k) change its accounting policies or
procedures, other than as required by GAAP or other applicable Laws (to the extent so required);
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(l) waive, release, assign, settle or compromise any Legal Actions, except
in the case of settlements or compromises where the amount paid is covered by insurance or does not exceed $1,000,000 in the aggregate and which, in each case, do not include any (a) licenses of material Company Intellectual Property Rights
that would, when such license is considered on a standalone basis, be outside the ordinary course of business, (b) exclusive license of material Company Intellectual Property Rights or (c) material restrictions on the Companys
business;
(m) take any action or omit to take any action that would reasonably be expected to cause any
material Company Intellectual Property Rights to become invalidated, abandoned or dedicated to the public domain; or
(n) authorize, propose or commit to do any of the foregoing.
Section 5.2 Conduct
of Business of Parent. Except as contemplated by this Agreement, Parent shall, and shall cause each of its Subsidiaries to, (x) conduct its operations in the ordinary course of business consistent with past practice, (y) use
commercially reasonable efforts to maintain and preserve intact its business organization, to retain the services of its current officers and key employees, and to preserve the good will of its customers, suppliers and other Persons with whom it has
business relationships and (z) refrain from taking any action that would reasonably be expected to materially diminish the value of its and their business. Without limiting the generality of the foregoing and except as otherwise contemplated by
this Agreement, required by Law (to the extent so required) or set forth in Section 5.2 of the Parent Disclosure Letter (or any letter agreement between the Company and Parent entered into after the date of the Original Agreement and prior to
the date hereof with respect to this Section 5.2), Parent shall not, and shall not permit any of its Subsidiaries to, take any of the following actions, without the prior written consent of the Company (not to be unreasonably withheld,
conditioned or delayed):
(a) amend its articles of association in any manner that changes the attributes of
the Parent Ordinary Shares or amend the certificate of incorporation of Merger Sub;
(b) make, declare or pay
any dividend or distribution on its share capital, other than dividends paid by wholly-owned Subsidiaries;
(c)
(i) adjust, split, combine or reclassify its share capital, (ii) redeem, purchase or otherwise acquire, directly or indirectly, any of its share capital or any securities convertible or exchangeable into or exercisable for any of its share
capital, (iii) issue, deliver or sell any of its share capital or any securities convertible or exchangeable into or exercisable for any of its share capital or such securities (other than pursuant to the exercise of Parent Share Options that
were outstanding as of the date of the Original Agreement ); or (iv) enter into any Contract, understanding or arrangement with respect to the sale, voting, registration or repurchase of its share capital;
(d) (i) increase the compensation or benefits payable or to become payable to any of its directors, officers or
employees, (ii) pay any compensation or benefits other than in the ordinary course of business pursuant to any existing plan or arrangement to its directors, officers or employees (including the granting, amending or repricing of stock options,
stock appreciation rights, shares of restricted stock or performance awards), (iii) grant any severance or termination pay to any of its directors, officers or employees (except pursuant to existing agreements, plans or policies),
(iv) enter into any new employment or severance agreement with any of its directors, officers or employees or (v) establish, adopt, enter into, amend in any material respect or take any action to accelerate rights under any Parent Benefit
Plans, except in each case (A) for increases in salary, wages and benefits (other than grants of Parent Share Options or performance awards) of officers or employees consistent with past practice, (B) in conjunction with new hires,
promotions or other changes in job status consistent with past practice (in respect of salary, wages and benefits, other than grants of Parent Share Options or performance awards) or (C) pursuant to existing Contracts that have been made
available to the Company;
(e) (i) acquire, by merger, consolidation, acquisition of equity interests or
assets, or otherwise, any business or any corporation, partnership, limited liability company, joint venture or other business
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organization or division thereof, to the extent such action would reasonably be expected to prevent, impede or delay the consummation of the Merger and the other transactions contemplated hereby,
including any acquisition that could (w) constitute an acquisition of a Significant Subsidiary of Parent or otherwise require (A) a pre-effective amendment of the Form F-4 Registration Statement containing new financial information
required by either Rule 3-05 or Article 11 under Regulation S-X promulgated by the SEC or (B) a post-effective amendment of the Form F-4 Registration Statement, in either case, whether by incorporation by reference or otherwise,
(x) prevent or lengthen the time period required to obtain clearance of the transactions contemplated hereby under the HSR Act, (y) cause Parent or its accountants to amend or modify the working capital statement in the Parent
Circular/Prospectus or any supplementary document, or (z) affect Parents ability to repay its debts as and when they fall due;
(f) sell, lease, license, transfer, pledge, encumber, grant or dispose of any assets of Parent or its Subsidiaries to the extent such action would reasonably be expected to prevent, impede or delay the
consummation of the Merger; or
(g) authorize, propose or commit to do any of the foregoing.
Section 5.3 Access to Information; Confidentiality; No Control.
(a) Each of the Company and Parent (such Person providing access pursuant to this Section 5.3, the
Disclosing Party
) shall, and shall cause their respective Subsidiaries to: (i) provide the other party (such party receiving access pursuant to this Section 5.3, the
Receiving Party
), and the Receiving
Partys Representatives access at reasonable times upon prior notice to the officers, employees, agents, properties, books and records of Disclosing Party and its Subsidiaries; and (ii) furnish promptly such information concerning the
Disclosing Party and its Subsidiaries as the Receiving Party or its Representatives may reasonably request;
provided
,
however
, that the Receiving Party and its Representatives shall conduct any such activities in such a manner as not
to interfere unreasonably with the conduct of business or operations of the Disclosing Party;
provided
,
further
,
however
, that the Disclosing Party shall not be obligated to provide such access or information if the Disclosing
Party determines, in its reasonable judgment, that doing so would violate applicable Law or any Contract or obligation of confidentiality owing to a third party, jeopardize the protection of an attorney-client privilege or expose the Disclosing
Party to risk of liability for disclosure of sensitive or personal information. No investigation conducted under this Section 5.3(a), however, will affect or be deemed to modify any representation or warranty made in this Agreement. Further,
this Section 5.3(a) shall not authorize any invasive or destructive sampling or testing of, or at, any property.
(b) Each of the Company and Parent shall promptly inform the other of all material developments concerning any material Legal Action involving such party or any of its Subsidiaries, including in relation
to any efforts to settle or compromise the same, and shall promptly furnish such information concerning such developments as the other party or its Representatives may reasonably request;
provided
, that neither party shall be obligated to
provide such access or information if it determines, in its reasonable judgment, that doing so would violate applicable Law or any Contract or obligation of confidentiality owing to a third party, jeopardize the protection of an attorney-client
privilege or expose such party to risk of liability for disclosure of sensitive or personal information.
(c)
Parent and the Company shall comply with, and shall cause their respective Representatives to comply with, all of their respective obligations under the Mutual Confidentiality Agreement, dated December 10, 2010, as amended, modified or
supplemented (the
Confidentiality Agreement
), between Parent and the Company with respect to the information disclosed under this Section 5.3.
(d) Nothing contained in this Agreement shall give Parent, directly or indirectly, rights to control or direct the
Companys or its Subsidiaries operations prior to the Effective Time. Prior to the Effective Time, the Company shall, consistent with the terms and conditions of this Agreement, exercise complete control and supervision over the
operations of the Company and its Subsidiaries.
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Section 5.4 No Solicitation.
(a) From the date of this Agreement until the Effective Time, except as specifically permitted in Section 5.4(d),
each of Parent and the Company agrees that it shall not, and shall cause its Subsidiaries not to, and shall use its commercially reasonable efforts to cause its and its Subsidiaries respective Representatives not to, directly or indirectly:
(i) solicit, initiate, knowingly facilitate or knowingly encourage any inquiries, offers or proposals relating
to a Takeover Proposal with respect to Parent or the Company, respectively;
(ii) engage in discussions or
negotiations with, or furnish or disclose any non-public information relating to such party or any of its Subsidiaries to, any Person that has made or indicated an intention to make a Takeover Proposal relating to such party in furtherance of such
Takeover Proposal (it being understood that this restriction shall not apply to the sharing of information in the ordinary course of business);
(iii) withdraw, modify, qualify or amend the Parent Board Recommendation or Company Board Recommendation, as the case may be, in any manner adverse to the other party;
(iv) approve, endorse or recommend any Takeover Proposal with respect to itself;
(v) enter into any Contract relating to a Takeover Proposal with respect to itself (other than an Acceptable
Confidentiality Agreement); or
(vi) agree to or publicly propose to take any of the foregoing actions.
(b) Each of Parent and the Company shall, and shall cause each of its Subsidiaries and its and their
respective Representatives to, immediately cease any existing solicitations, discussions or negotiations with any Person that has made or indicated an intention to make a Takeover Proposal with respect to Parent or the Company, respectively. Each of
Parent and the Company shall, to the extent it has a contractual right to do so, promptly request that each Person who has executed a confidentiality agreement with such party in the 12-month period prior to the date of the Original Agreement in
connection with that Persons consideration of a Takeover Proposal with respect to such Party return or destroy all non-public information furnished to that Person by or on behalf of such party. Each of Parent and the Company shall promptly
inform its Representatives of such partys obligations under this Section 5.4. Each of Parent and the Company agrees that any violation of the provisions of this Section 5.4 at the direction or with the consent of such party by any of
its Subsidiaries or any Representative of such party or any of its Subsidiaries shall be deemed to be a breach of this Section 5.4 by such party. Furthermore, each of Parent and the Company agrees that any violation of the provisions of
Section 5.4 of the Original Agreement that occurred at any time prior to the date hereof by Parent or the Company, respectively, or at the direction or with the consent of such party by any of its Subsidiaries or any Representative of such
party or any of its Subsidiaries, shall be deemed to have been a breach of Section 5.4 of this Agreement by such party.
(c) Each of Parent and the Company shall notify the other promptly upon receipt by such party of (i) any Takeover Proposal or a written indication that would be reasonably likely to lead to a
Takeover Proposal with respect to such party or (ii) any request for non-public information relating to such party or any of its Subsidiaries in connection with a Takeover Proposal with respect to such party or under circumstances that would be
reasonably likely to lead to a Takeover Proposal with respect to such party. Each of Parent and the Company shall provide the other promptly with the identity of such Person and a copy of such Takeover Proposal, indication or request (or, where no
such copy is available, a written summary of the material terms of such Takeover Proposal). Each of Parent and the Company shall keep the other informed on a reasonably current basis of the status of any such Takeover Proposal, indication or
request, and any related communications to or by such party or its Representatives.
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(d) Notwithstanding anything in this Agreement to the contrary, provided
that such party has complied and continues to comply in all material respects with the provisions of this Section 5.4 and only until the Requisite Parent Vote or Requisite Company Vote, as applicable, is obtained, Parent or the Company, as
applicable, and its board of directors may:
(i) (A) engage in discussions and negotiations with a Person
who has made a
bona fide
unsolicited Takeover Proposal and (B) furnish or disclose any non-public information relating to the Company or any of its Subsidiaries, or Parent or any of its Subsidiaries, as applicable, to such Person, in
either case if and only if (w) prior to furnishing or disclosing such information, the Company or Parent, as applicable, has caused such Person to enter into a confidentiality agreement with the Company or Parent, as applicable, on terms and
conditions that are substantially equivalent to those contained in the Confidentiality Agreement, provided that any such confidentiality agreement contains provisions expressly permitting the Company or Parent, as applicable, to comply with its
obligations under this Agreement notwithstanding any restrictions set forth therein (an
Acceptable Confidentiality Agreement
), (x) the Company or Parent, as applicable, concurrently discloses the same such non-public
information to Parent or the Company, as applicable (in each case, to the extent not already disclosed)), and (y) in the case of the Company, the board of directors of the Company determines in good faith, after consultation with the Company
Financial Advisor and the Companys outside legal counsel, that such Takeover Proposal either is a Superior Proposal or would be reasonably likely to lead to a Superior Proposal, or in the case of Parent, the board of directors of Parent
determines in good faith, after consultation with the Parent Financial Advisor and Parents outside legal counsel, that such Takeover Proposal either is a Superior Proposal or would be reasonably likely to lead to a Superior Proposal;
(ii) (x) withdraw, modify, qualify or amend the Parent Board Recommendation or Company Board Recommendation,
as the case may be, in a manner adverse to the other party, in response to a
bona fide
unsolicited Takeover Proposal with respect to such party, (y) recommend such Takeover Proposal, or (z) terminate this Agreement to enter into a
Contract relating to such Takeover Proposal pursuant to Section 7.3(e) (in the case of Parent) or Section 7.4(e) (in the case of the Company), in each case if and only if (A) the board of directors of such party determines in good
faith, after consultation with the Parent Financial Advisor or the Company Financial Advisor, as the case may be, and such partys outside legal counsel, that such Takeover Proposal constitutes a Superior Proposal, (B) such partys
board of directors determines in good faith, after consultation with its outside legal counsel, that failure to take such action would be inconsistent with the fiduciary and other duties of its directors; (C) such party provides the other with
three Business Days prior written notice of its board of directors intention to take such action (including notice as to whether such party intends to terminate this Agreement and enter into a Contract with respect to such Superior Proposal),
and (D) (1) during the three Business Day period following receipt of such notice, if so requested by the party receiving such notice, such party negotiates with and causes its financial and legal advisors to negotiate with the other
regarding potential amendments to the terms and conditions of this Agreement which might cause such Takeover Proposal to no longer constitute a Superior Proposal, and (2) following the end of such three Business Day period, such partys
board of directors determines in good faith, after taking into account any proposed amendments to the terms and conditions of this Agreement offered in writing to such party by the other in response to such notice or otherwise and after consultation
with the Parent Financial Advisor or the Company Financial Advisor, as the case may be, and such partys outside legal counsel, that the Superior Proposal giving rise to such notice continues to constitute a Superior Proposal and that the
failure to take such action would continue to be inconsistent with the fiduciary and other duties of its directors (provided that any material amendment to the financial terms of such Superior Proposal shall not require a new notice and shall not
require such party to further comply with the requirements of this Section 5.4(d)(ii));
(iii) in the
absence of a Takeover Proposal, withdraw, modify, qualify or amend the Parent Board Recommendation or Company Board Recommendation, as the case may be, in a manner adverse to the other party, if and only if (x) the board of directors of such
party determines in good faith, after
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consultation with its outside legal counsel, that the failure to take such action would be inconsistent with the fiduciary and other duties of its directors, and (y) such party provides the
other with three (3) Business Days prior written notice of its board of directors intention to take such action, specifying in reasonable detail the reasons and basis therefor.
(e) For the avoidance of doubt, nothing in this Agreement shall prohibit the board of directors of the Company from
disclosing to the stockholders of the Company a position contemplated by Rule 14e-2(a) and Rule 14d-9 promulgated under the Exchange Act (it being understood and agreed that any stop-look-and-listen communication by the board
of directors of the Company to the stockholders of the Company pursuant to Rule 14d-9(f) of the Exchange Act, or any similar communication to the stockholders of the Company in connection with the commencement of a tender offer or exchange
offer containing the substance of a stop-look-and-listen communication pursuant to Rule 14d-9(f), shall not be deemed to be a withdrawal, modification or amendment of the Company Board Recommendation);
provided
, that the
Company shall not make any disclosure pursuant to Rule 14e-2(a) or Rule 14d-9 promulgated under the Exchange Act that would amount to a withdrawal, modification, qualification or amendment of the Company Board Recommendation other than
pursuant to Section 5.4(d).
(f) Notwithstanding anything in this agreement to the contrary, except with
respect to a withdrawal, modification, qualification or amendment of the Company Board Recommendation or the Parent Board Recommendation (which shall be subject to this Section 5.4), nothing in this Agreement will prohibit either party from
making disclosures to shareholders or otherwise that the board of directors of such party determines in good faith are required by applicable Laws.
Section 5.5 Notices of Certain Events.
(a) The Company shall
notify Parent promptly of (i) any communication from any Person alleging that the consent of such Person (or another Person) is or may be required in connection with the transactions contemplated by this Agreement, (ii) subject to any
legal requirements as to confidentiality, any communication from any Governmental Entity in connection with the transactions contemplated by this Agreement, (iii) any material Legal Actions threatened in writing or commenced against or
otherwise affecting the Company or any of its Subsidiaries or (iv) any material event, change, occurrence, circumstance or development between the date of the Original Agreement and the Effective Time that makes any of the representations or
warranties of the Company contained in this Agreement untrue or inaccurate;
provided
, that the failure to comply with this clause (iv) shall not be considered a breach of or failure to perform this Agreement, unless such breach or
failure would reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect.
(b) Parent shall notify the Company promptly of (i) any communication from any Person alleging that the consent of such Person (or other Person) is or may be required in connection with the
transactions contemplated by this Agreement, (ii) subject to any legal requirements as to confidentiality, any communication from any Governmental Entity in connection with the transactions contemplated by this Agreement, (iii) any
material Legal Actions threatened in writing or commenced against or otherwise affecting Parent or any of its Subsidiaries, or (iv) any material event change, occurrence, circumstance or development between the date of the Original Agreement
and the Effective Time that makes any of the representations or warranties of Parent contained in this Agreement untrue or inaccurate;
provided
, that the failure to comply with this clause (iv) shall not be considered a breach of or
failure to perform this Agreement, unless such breach or failure would reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect.
Section 5.6 Proxy/Form F-4 Registration Statement.
(a) As
promptly as practicable after the execution of this Agreement, (i) Parent shall file with the SEC an amendment to the Form F-4 Registration Statement (Registration No. 333-173590), originally filed with the SEC on April 19, 2011,
which Form F-4 Registration Statement includes a single document (the
Proxy Statement/Prospectus
) constituting both (A) the Proxy Statement and (B) the prospectus, (ii) Parent shall
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file a registration statement on Form 8-A (the
Form 8-A Registration Statement
) in connection with the registration under the Exchange Act of the ADSs to be issued to the
stockholders of the Company pursuant to the Merger and the underlying Parent Ordinary Shares, and (iiii) Parent shall prepare and use commercially reasonable efforts to cause the Depositary Bank to file with the SEC the Form F-6 Registration
Statement Parent and the Company shall cause the Proxy Statement/Prospectus to comply as to form and substance in all material respects with the requirements of Laws. Parent shall cause the Form F-6 Registration Statement and the Form 8-A
Registration Statement to comply as to form and substance in all material respects with the requirements of Laws. Parent and the Company shall use their commercially reasonable efforts to cause the Form F-4 Registration Statement, the Form F-6
Registration Statement and the Form 8-A Registration Statement to become effective as promptly as practicable (the date of effectiveness being the
Registration Statement Effective Date
). Parent shall use commercially reasonable
efforts to obtain, prior to the effectiveness of the Form F-4 Registration Statement, all permits, approvals or exceptions as required to consummate the transactions contemplated hereby. Each of Parent and the Company shall immediately notify the
other of any communication from the SEC (and, to the extent such communication is in writing, provide to the other a copy of such communication) concerning the Form F-4 Registration Statement, the Form 8-A Registration Statement, the Form F-6
Registration Statement or the Proxy Statement/Prospectus. Parent or the Company each shall furnish all information concerning itself as the other party may reasonably request in connection with the preparation of the Proxy Statement/Prospectus and
each shall cause (so far as it is legally capable of causing) its accountants to assist with the furnishing of such information. As promptly as practicable after the Registration Statement Effective Date, the proxy statement and prospectus included
in the Proxy Statement/Prospectus (collectively, the
Proxy Materials
) shall be mailed to the stockholders of the Company.
(b) Subject to Section 5.4, no amendment or supplement to the Proxy Statement/Prospectus shall be made without the approval of each of Parent and the Company, which approval shall not be unreasonably
withheld, delayed or conditioned. Each of Parent and the Company shall promptly advise the other upon becoming aware of (i) the time when the Form F-4 Registration Statement, the Form F-6 Registration Statement or the Form 8-A Registration
Statement has become effective or any supplement or amendment has been filed, (ii) the issuance of any stop order, (iii) the suspension of the qualification of ADSs issuable in connection with the Merger for offering or sale in any
jurisdiction or (iv) any comments, responses or requests from the SEC relating to the Form F-4 Registration Statement or Proxy Statement/Prospectus, the Form F-6 Registration Statement or the Form 8-A Registration Statement or any of the
transactions contemplated by this Agreement.
(c) The information supplied by the Company for inclusion in the
Proxy Statement/Prospectus shall not, at (i) the Form F-4 Registration Statement Effective Date, (ii) the time the Proxy Materials (or any amendment of or supplement to the Proxy Materials) are first mailed to the stockholders of the
Company, (iii) the time of the Company Stockholders Meeting and (iv) the Effective Time, contain any untrue statement of a material fact or fail to state any material fact required to be stated in the Proxy Statement/Prospectus or
necessary in order to make the statements in the Proxy Statement/Prospectus not misleading. If, at any time prior to the Effective Time, any information relating to the Company or any of its Subsidiaries should be discovered by the Company that
should be set forth in an amendment or a supplement to the Proxy Statement/Prospectus, the Company shall promptly inform Parent. All documents that the Company is responsible for filing with the SEC in connection with the transactions contemplated
by this Agreement shall comply as to form and substance in all material respects with the applicable requirements of the DGCL, the Securities Act and the Exchange Act.
(d) The information supplied by Parent for inclusion in the Proxy Statement/Prospectus and in any other filing with the
SEC by the Company, Parent or the Depositary Bank shall not, at (i) the Form F-4 Registration Statement Effective Date, (ii) the time the Proxy Materials (or any amendment of or supplement to the Proxy Materials) are first mailed to the
stockholders of the Company, (iii) the time of the Company Stockholders Meeting, (iv) the Effective Time and (v) at the time such document is filed with or submitted to the SEC, contain any untrue statement of a material fact or fail
to state any material fact
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required to be stated in the Proxy Statement/Prospectus or necessary in order to make the statements in the Proxy Statement/Prospectus not misleading. If, at any time prior to the Effective Time,
any information relating to Parent or any of its Subsidiaries should be discovered by Parent that should be set forth in an amendment or a supplement to the Proxy Statement/Prospectus, Parent shall promptly inform the Company. All documents that
Parent is responsible for filing with the SEC in connection with the transactions contemplated by this Agreement shall comply as to form and substance in all material aspects with the applicable requirements of the Securities Act and the Exchange
Act.
(e) Subject to Sections 5.4(d)(ii) or 5.4(d)(iii), the Company Proxy Statement shall include the
Company Board Recommendation.
Section 5.7 Parent Shareholder Circular/Prospectus.
(a) As promptly as practicable after the execution of this Agreement, Parent shall prepare and file with the UKLA for its
approval a draft copy of the Parent Circular/Prospectus and Parent shall cause the Parent Circular/Prospectus to comply as to form and substance in all material respects with the requirements of Laws. The Company shall furnish all information
concerning itself as Parent may reasonably request in connection with the preparation of the Parent Circular/Prospectus. Parent shall use commercially reasonable efforts to obtain formal approval of the Parent Circular/Prospectus concurrently with
the Form F-4 Registration Statement Effective Date including, specifically and without limitation, supplying all such information, giving all such undertakings, executing all such documents, paying all such fees and doing or procuring to be done all
such things as may be necessary or required by the UKLA for the purposes of obtaining such approval. As promptly as practicable after the Parent Circular/Prospectus is approved by the UKLA, Parent shall procure that the directors of Parent mail the
Parent Shareholder Circular to the shareholders of Parent and publish the Parent Prospectus in accordance with applicable Law.
(b) The Company and its counsel shall be given a reasonable opportunity to review and comment on the Parent Circular/Prospectus and any amendments or supplements thereto (in each case prior to the
publication thereof), including, if practical to do so, any documents to be sent to holders of Parent Ordinary Shares for the purposes of adjourning the Parent Shareholders Meeting, and Parent will take into account any reasonable comments made by,
or reasonable requests of, the Company and its counsel. The Parent Circular/Prospectus shall not be published without the approval of the Company, which approval shall not be unreasonably withheld, delayed or conditioned. Parent shall promptly
advise the Company upon becoming aware of (i) the time when the Parent Circular/Prospectus has been approved by the UKLA or any supplement or amendment has been filed or (ii) any comments, responses or requests from the UKLA relating to
the Parent Circular/Prospectus.
(c) The information supplied by the Company for inclusion in the Parent
Circular/Prospectus and any announcement to any regulatory information service approved by the UKLA in connection with the Parent Circular/Prospectus shall not, in the case of the Parent Circular/Prospectus, at the time the Parent Shareholder
Circular is first mailed to shareholders of Parent and the Parent Prospectus is first published and at the time such shareholders vote on the resolutions set forth in the Parent Shareholder Circular, and in the case of any such announcement at the
time it is provided by the Company to the Parent, contain any untrue statement of a material fact or fail to state any material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were
made, not misleading.
(d) Subject to Sections 5.4(d)(ii) or 5.4(d)(iii), the Parent Circular/Prospectus
shall include the Parent Board Recommendation.
Section 5.8 Stockholders/Shareholders Meetings.
(a) The Company shall call and hold the Company Stockholders Meeting as promptly as practicable after the Form F-4
Registration Statement Effective Date for the purpose of voting upon adoption of this Agreement. Parent and the Company shall cooperate with each other to cause the Company Stockholders Meeting to be held as promptly as practicable following the
mailing of the Proxy Materials to the
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stockholders of the Company. Subject to Section 5.4(d) and Section 5.4(e), the Company shall (i) use commercially reasonable efforts to solicit or cause to be solicited from its
stockholders proxies in favor of adoption of this Agreement and (ii) take all other action reasonably necessary or advisable to secure the Requisite Company Vote. Notwithstanding anything to the contrary contained in this Agreement, it shall
not be a condition to the transactions contemplated by this Agreement that any resolution required by the Dodd-Frank Wall Street Reform and Consumer Protection Act to be acted on by the Companys stockholders at the Company Stockholders Meeting
be approved by the Companys stockholders and that the failure of the Companys stockholders to approve any such resolution shall in no way affect the obligations of the parties hereto.
(b) Parent shall call and hold the Parent Shareholders Meeting as promptly as practicable after the Form F-4 Registration
Statement Effective Date for the purpose of obtaining the Requisite Parent Vote. Parent and the Company shall cooperate with each other to cause the Parent Shareholders Meeting to be held as promptly as practicable following the mailing of the
Parent Shareholder Circular to the shareholders of Parent. Subject to 5.4(d), Parent shall (i) use commercially reasonable efforts to solicit or cause to be solicited from its shareholders proxies in favor of the transactions contemplated by
this Agreement and the matters subject to the Requisite Parent Vote and (ii) take all other action reasonably necessary or advisable to secure the Requisite Parent Vote.
(c) Notwithstanding the foregoing clauses (a) and (b), the Company and Parent shall cooperate with one another in
setting a mutually acceptable date, which shall be as soon as reasonably practicable, for the Company Stockholder Meeting and the Parent Shareholder Meeting to enable them to occur, to the extent practicable, on the same date.
(d) Notwithstanding anything to the contrary contained in this Agreement, Parent or the Company, as the case may be, may
adjourn or postpone the Parent Shareholders Meeting or the Company Stockholders Meeting, as the case may be, to the extent necessary (i) to provide any supplement or amendment to the Parent Circular/Prospectus or the Proxy Materials, as the
case may be, necessary under applicable Law, (ii) if as of the time for which the Parent Shareholders Meeting or the Company Stockholders Meeting, as the case may be, is originally scheduled (as set forth in the Proxy Statement/Prospectus or
the Parent Circular/Prospectus, as the case may be), there are insufficient shares of capital stock represented (either in person or by proxy) to constitute a quorum necessary to conduct the business of such shareholders meeting, or (iii) if
the other party has adjourned or postponed its shareholders meeting for any of the foregoing reasons.
Section 5.9 Benefit
Plans; Section 16 Matters.
(a) Prior to the Effective Time, the Company shall take all actions with
respect to the Company Option Plans and the ESPP and all Company Stock Options, Company RSUs and other outstanding awards and rights thereunder as shall be necessary to make the adjustments described under and effect the provisions of
Section 2.4, including notifying participants in the Company Option Plans and ESPP of such adjustments and actions and, if required, obtaining consent therefrom. Prior to the Effective Time, the Company shall take all actions necessary and
satisfactory to Parent to terminate the ESPP effective as of or prior to the Effective Time. Following the date of the Original Agreement, participants in the ESPP may not increase their payroll deductions or otherwise increase their purchase
elections under the ESPP from those in effect on the date of the Original Agreement. Parent shall take commercially reasonable efforts to cause the Company and its appropriate Subsidiaries to be designated as a participating company under
Parents Employee Share Purchase Plan as soon as reasonably practicable following the Closing.
(b) If any
employee of the Company or any of its Subsidiaries as of the Effective Time (each, a
Company Employee
) is, at any time after the Effective Time, transferred to Parent or any of its Subsidiaries or becomes a participant in an
employee benefit plan, program or arrangement maintained or contributed to by Parent or any of its Subsidiaries (other than the Company and its Subsidiaries), then Parent shall (i) treat the prior service of such employee with the Company or
its Subsidiaries, to the extent prior service was generally recognized under the Company Benefit Plans providing similar benefits, as service
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rendered to Parent or such Subsidiary of Parent for purposes of eligibility and vesting and (ii) waive any pre-existing condition limitation that might otherwise apply to such employee,
under such plan, program or arrangement to the extent waived or satisfied under the terms of a Company Benefit Plan. Except in each case where the applicable terms and conditions of employment are specified by (w) Law, (x) collective
bargaining agreement, (y) works council rules or similar arrangements, or (z) a Contract between a Company Employee, on the one hand, and Parent, any of Parents Subsidiaries, the Company or any of the Companys Subsidiaries, on
the other hand, entered into after the date of the Original Agreement (and that is not effective until the Effective Time), as of the Effective Time, and for a period ending on December 31, 2011 (the
Continuation Period
),
Parent agrees to provide or cause its Subsidiaries (including the Surviving Corporation) to provide each Company Employee who continues to be employed by Parent or any of its Subsidiaries (including the Surviving Corporation) after the Effective
Time (i) base salary or annual wages (as applicable) that are not less favorable than the base salary or annual wages, as applicable, such Company Employee received immediately prior to the Effective Time, and (ii) employee benefits that
are no less favorable, in the aggregate, than those employee benefits (excluding any defined benefit retirement plans, change in control or transaction-based compensation, retention or stay bonuses or equity-based compensation) provided to Company
Employees immediately prior to the Effective Time pursuant to the Company Benefit Plans.
(c) The board of
directors of the Company and Parent shall, prior to the Effective Time, take all actions as may be necessary or appropriate to cause the transactions contemplated by this Agreement and any other dispositions of equity securities of the Company
(including derivative securities) in connection with the transactions contemplated by this Agreement by each individual who is a director or officer of the Company to be exempt under Rule 16b-3 promulgated under the Exchange Act.
(d) The provisions of this Section 5.9 are for the sole benefit of the parties to this Agreement and nothing herein,
express or implied, is intended or shall be construed to confer upon or give to any Person, other than the parties hereto and their respective permitted successors and assigns, any legal or equitable or other rights or remedies under or by reason of
any provision of this Agreement. No provision of this Agreement shall create any third party beneficiary rights in any employee or former employee of the Company or any of its Subsidiaries (including any beneficiary or dependant thereof) in respect
of employment by the Company or any of its Subsidiaries. Nothing herein shall (i) guarantee employment for any period of time or preclude the ability of Parent or the Surviving Corporation and each of their Subsidiaries to terminate any
employee of the Surviving Corporation or any of their Subsidiaries for any reason or (ii) require Parent or the Surviving Corporation or any of their respective Subsidiaries to continue any Company Benefit Plans, employee benefit plans or
arrangements or prevent the amendment modification or termination thereof after the Effective Time.
Section 5.10
Directors and Officers Indemnification and Insurance.
(a) All rights to indemnification,
advancement of expenses and exculpation existing on the date of the Original Agreement in favor of any present or former director or officer of the Company or any of its Subsidiaries (the
Indemnified Parties
) as provided in the
Company Organizational Documents, or any organizational documents of any of the Companys Subsidiaries, or in agreements between an Indemnified Party and the Company or one of its Subsidiaries, or otherwise in effect on the date of the Original
Agreement shall survive the Merger and shall continue in full force and effect after the Effective Time and the provisions in the Company Organizational Documents, any organizational documents of any of the Companys Subsidiaries or any such
agreement providing for such indemnification advancement of expenses and exculpation shall not be amended, repealed or otherwise modified in any manner that would adversely affect the rights thereunder of any such individual.
(b) Parent shall, and shall cause the Surviving Corporation to, indemnify all Indemnified Parties to the fullest extent
permitted by applicable Laws with respect to all claims, liabilities, losses, damages, judgments, fines, penalties, costs (including amounts paid in settlement or compromise) and expenses (including fees and expenses of legal counsel) in connection
with any Legal Action, whenever asserted,
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based on or arising out of, in whole or in part, (i) the fact that an Indemnified Party was a director or officer of the Company or any of its Subsidiaries at or prior to the Effective Time
or (ii) acts and omissions arising out of or relating to their services as directors or officers of the Company or its Subsidiaries occurring at or prior to the Effective Time. If any Indemnified Party is or becomes involved in any such Legal
Action, Parent shall pay as incurred such Indemnified Partys legal fees, costs and expenses incurred in connection with such Legal Action, subject to Parents receipt of an undertaking by or on behalf of such Indemnified Party to repay
such legal fees, costs and expenses if it is ultimately determined under applicable Laws that such Indemnified Party is not entitled to be indemnified.
(c) Parent shall, or shall cause the Surviving Corporation to, maintain in effect for at least seven years after the Effective Time the current policies of directors and officers liability
insurance maintained by the Company, or policies of at least the same coverage and amounts containing terms and conditions which are no less advantageous to the individuals covered by such policies than the terms of such policies in effect on the
date of the Original Agreement (
D&O Replacement Policy
), so long as Parent and the Surviving Corporation are not required to pay an annual premium in excess of 200% of the last annual premium paid by the Company for such
insurance prior to the date of the Original Agreement (the dollar amount of such percentage being the
Maximum Premium
). If Parent is unable to obtain, or unable to so cause to be obtained, the insurance described in the prior
sentence for an amount less than or equal to the Maximum Premium, it shall instead obtain, or cause the Surviving Corporation to obtain, as much comparable insurance as possible for an annual premium equal to the Maximum Premium. Any insurance
obtained by Parent or the Surviving Corporation pursuant to this Section 5.10(c) shall not result in gaps in coverage. The Company represents and agrees that the Maximum Premium as of the date of the Original Agreement was $774,000. Prior to
the Effective Time, the Company may, and after the Effective Time, Parent may, obtain one or more seven year prepaid
tail policy
or policies in lieu of the current policies of directors and officers liability insurance
maintained by the Company applicable from and after the Effective Time to the acts and omissions of directors and officers of the Company up to and including the Effective Time and providing the same coverage and amounts and terms and conditions as
such current policies (collectively, the
D&O Tail Policy
). Parent shall not take any action to terminate the D&O Replacement Policy or the D&O Tail Policy during such seven-year period, and any insurance obtained by
Parent or the Surviving Corporation pursuant to this Section 5.10(c) shall not result in gaps in coverage. If such D&O Tail Policy is obtained, Parent shall not be obligated to obtain the D&O Replacement Policy.
Section 5.11 Governance of Parent. At the Effective Time, Parent shall take the actions specified in Section 5.11 of the Parent
Disclosure Letter.
Section 5.12 Reasonable Efforts. Upon the terms and subject to the conditions set forth in this Agreement,
each of the parties to this Agreement shall use its commercially reasonable efforts to take, or cause to be taken, all appropriate actions, and to do, or cause to be done, all things necessary, proper or advisable to cause the conditions set forth
in Article VI to be satisfied and to consummate the transactions contemplated by this Agreement as promptly as practicable (and similarly to refrain from doing and cause not to be done any action, including any transaction, that would
reasonably be expected to cause such conditions to fail to be satisfied).
Section 5.13 Consents; Filings; Further
Action.
(a) Upon the terms and subject to the conditions of this Agreement and in accordance with applicable
Laws, each of the parties to this Agreement shall (i) as promptly as practicable make any necessary filings, applications and notifications, and thereafter make any other submissions either required or deemed appropriate by each of the parties
to this Agreement, in connection with the transactions contemplated by this Agreement under (A) the HSR Act, (B) the DGCL and the Companies Act, and (C) the rules and regulations of The NASDAQ Stock Market, the London Stock Exchange
and the Financial Services Authority, and (ii) as promptly as practicable, execute and deliver any additional instruments necessary to consummate the transactions contemplated by, and to fully carry out the purposes of, this Agreement. Subject
to applicable Laws or the requirements of The NASDAQ Stock Market, the London Stock Exchange or the Financial Services Authority, Parent and the Company shall cooperate and consult with
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each other in connection with the making of all such filings, applications, notifications and other submissions, including by providing copies of all such documents to the non-filing party and
its advisors prior to filing and furnishing each other (on an outside counsel basis if appropriate) all information required for any such filing, application, notification, or other submission. Subject to applicable Laws or the requirements of The
NASDAQ Stock Market, the London Stock Exchange or the Financial Services Authority, neither Parent nor the Company shall file any such document if the other party has reasonably objected to the filing of such document. As promptly as practicable
following the date of this Agreement, to the extent required by the OCS, the Company shall notify the OCS of the contemplated restructuring of the merger as set forth under this Agreement. Neither Parent nor the Company shall consent to any
voluntary extension of any statutory deadline or waiting period or to any voluntary delay of the consummation of the transactions contemplated by this Agreement at the behest of any Governmental Entity without the consent of the other party, which
consent shall not be unreasonably withheld or delayed.
(b) Each of Parent and the Company shall promptly
inform the other party upon receipt of any communication from the Federal Trade Commission, the Department of Justice or any other Governmental Entity regarding any of the transactions contemplated by this Agreement. If Parent or the Company (or any
of their respective Affiliates) receives a request for additional information from any such Governmental Entity that is related to the transactions contemplated by this Agreement, then such party shall make, or cause to be made, as soon as
reasonably practicable and after consultation with the other party, a response in full compliance with such request. The parties shall also consult and cooperate with one another, and consider in good faith the views of one another, in connection
with, and provide to the other parties in advance, any analyses, appearances, presentations, memoranda, briefs, arguments, opinions and proposals made or submitted by or on behalf of any party hereto in connection with proceedings under or relating
to any Competition Law. Without limiting the foregoing, the parties hereto agree to (A) give each other reasonable advance notice of all meetings with any Governmental Entity relating to any Competition Law, (B) give each other an
opportunity to participate in such meeting, (C) to the extent practicable, give each other reasonable advance notice of all substantive oral communications with any Governmental Entity relating to any Competition Law, (D) if any
Governmental Entity initiates a substantive oral communication regarding any competition Law, promptly notify the other party of the substance of such communication, (E) provide each other with a reasonable advance opportunity to review and
comment upon all written communications (including any analyses, presentations, memoranda, briefs, arguments, opinions and proposals) with a Governmental Entity regarding the notification required under the HSR Act and (F) provide each other
with copies of all written communications to or from any Governmental Entity relating to the HSR Act. Any such disclosures or provision of copies by one party to the other may be made on an outside counsel basis if appropriate. Notwithstanding
anything in this Agreement to the contrary, but subject to Section 5.13(c), and unless the boards of directors of the Company and Parent mutually agree otherwise, each of the parties shall, and shall cause each of its Subsidiaries to, take any
and all actions necessary to obtain any consents, clearances or approvals required under or in connection with any Competition Law and to enable all waiting periods under any Competition Law to expire, and to avoid or eliminate each and every
impediment under any Law asserted by any Governmental Entity, in each case, to cause the Merger and the other transactions contemplated hereby to occur as promptly as possible, including but not limited to (i) promptly complying with or
modifying any requests for additional information (including any second request) by any Governmental Entity, (ii) if necessary to obtain clearance by any Governmental Entity as promptly as possible, offering, negotiating, committing to and
effecting, by consent decree, hold separate order or otherwise, the sale, divestiture, license or other disposition of any and all of the capital stock, assets, rights, products or business of Parent and its Subsidiaries and the Company and its
Subsidiaries or committing to any restrictions on its business and (iii) contesting, defending and appealing any threatened or pending preliminary or permanent injunction or other order, decree or ruling or statute, rule, regulation or
executive order that would adversely affect the ability of any party hereto to consummate the transactions contemplated hereby and taking any and all other actions to prevent the entry, enactment or promulgation thereof.
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(c) Notwithstanding the foregoing, nothing in this Section 5.13 will
require, or be construed to require, Parent or the Company to agree to (i) sell, hold separate, divest, discontinue or limit, before or after the Effective Time, any assets, businesses or interest in any assets or businesses of Parent, the
Company or any of their respective Affiliates or (ii) any conditions relating to, or changes or restriction in, the operations of any such assets or businesses which, in the case of either clause (i) or (ii), would reasonably be expected
to result in a material adverse effect on the business of Parent and the Company, taken together, as expected to be conducted after the Effective Time.
Section 5.14 INTENTIONALLY OMITTED.
Section 5.15 Public Announcements. Subject
to Section 5.4(f), Parent and the Company shall consult with each other, and take into account the reasonable comments of the other, before issuing any press release or otherwise making any public statements about this Agreement or any of the
transactions contemplated by this Agreement. Neither Parent nor the Company shall issue any such press release or make any such public statement prior to such consultation, except to the extent required by applicable Laws or the requirements of The
NASDAQ Stock Market, the London Stock Exchange or the Financial Services Authority, in which case that party shall use commercially reasonable efforts to consult with the other party, and take into account the reasonable comments of the other party,
before issuing any such release or making any such public statement.
Section 5.16 Establishment of ADR Facility; Stock
Exchange Listings.
(a) Parent shall cause a sponsored American depositary receipt (
ADR
)
facility (the
ADR Facility
) to be established with JPMorgan Chase Bank, N.A. (the
Depositary Bank
) for the purpose of issuing the ADSs, including specifically and without limitation entering into a customary
deposit agreement (the
Deposit Agreement
) with the Depositary Bank establishing the ADR Facility, to be effective as of the Effective Time, and filing with the SEC the Form F-6 Registration Statement. Parent shall consider in good
faith the comments of the Company on the Deposit Agreement, and the Deposit Agreement shall be subject to the approval of the Company, such approval not to be unreasonably withheld. In any event, subject to the prior sentence and applicable Laws,
the Deposit Agreement shall (A) provide (i) that each ADS under the ADR Facility shall represent and be exchangeable for four (4) Parent Ordinary Shares, (ii) for customary provisions for the voting by the Depositary Bank of such
Parent Ordinary Shares as instructed by the holders of the ADSs, (iii) for the issuance, at the request of a holder, of either certificated or uncertificated ADRs, (iv) subject to the limitations provided for in General Instruction I.A.1
of SEC Form F-6, that holders of ADSs shall have the right at any time to exchange their ADSs for the underlying Parent Ordinary Shares and (v) that the Parent Ordinary Shares deposited by Parent with the Custodian for the ADR Facility shall be
held by the Custodian for the benefit of the Depositary Bank, (B) require the Depositary Bank to forward voting instructions and other shareholder communications (including notices, reports and proxy solicitation materials) to the registered
holders of ADSs promptly following its receipt of such materials, (C) include customary provisions for the distribution to holders of ADSs of dividends, other distributions or the rights to participate in any rights offerings in each case
received by the Custodian from Parent (or in certain cases the US dollars available to the Depositary from the net proceeds of the sale of the foregoing), and (D) not permit (x) except as required by applicable Law, any amendment that
prejudices any substantial right of ADS holders without giving at least 30 days notice to the holders of the outstanding ADSs, or (y) any termination by Parent or the Depositary Bank on less than 30 days written notice to ADS
holders. The Deposit Agreement shall not provide for (i) a right of Parent to withdraw Parent Ordinary Shares from the custody account maintained by the Custodian or (ii) fees to be imposed by the Depositary upon holders of ADSs in
connection with the sale or transfer of such ADSs on the NASDAQ Stock Market. The material terms of the Deposit Agreement and the ADSs shall be described in the Proxy Statement/Prospectus. At or prior to the Effective Time, Parent shall cause the
Depositary Bank to issue a number of ADSs sufficient to constitute the non-cash portion of the Merger Consideration. The holders of ADSs shall not be liable for any UK stamp duty reserve tax arising (i) on the issuance of ADSs by the Depositary
in connection with the Merger, or (ii) under applicable Law in effect on the date of this Agreement, on any subsequent sale or
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transfer of such ADSs by such holders on the NASDAQ Stock Market. The Company shall use commercially reasonable efforts to cause the ADSs to be eligible for settlement through the Depository
Trust Company.
(b) Parent shall use its commercially reasonable efforts to cause the ADSs to be issued in the
Merger to be approved for listing (subject to official notice of issuance) on The NASDAQ Stock Market as promptly as practicable after the establishment of the ADR Facility.
(c) Parent shall use its commercially reasonable efforts to cause the Parent Ordinary Shares underlying the ADSs to be
issued in the Merger to be approved for admission to the Official List of the UKLA and to trading on the London Stock Exchanges main market for listed securities prior to the Effective Time including, specifically and without limitation,
supplying all such information, giving all such undertakings, executing all such documents, paying all such fees and doing or procuring to be done all such things as may be necessary or required by the UKLA or the London Stock Exchange for the
purposes of obtaining such approval. The Parent shall, on or prior to Closing, procure the waiver of any cancellation of the admission of the Parent Ordinary Shares to the Official List of the UKLA pursuant to the Listing Rules as a result of the
Merger or procure that, with effect from the Effective Time, all such shares (including the Parent Ordinary Shares to be issued pursuant to the Merger) shall be admitted or readmitted, as applicable, to the Official List of the UKLA.
(d) The parties to this Agreement shall use their commercially reasonable efforts to cause the Company Common Stock to be
de-listed from The NASDAQ Stock Market and de-registered under the Exchange Act as promptly as practicable following the Effective Time.
Section 5.17 Fees, Costs and Expenses. Whether or not the Merger is consummated, all expenses (including those payable to Representatives) incurred by any party to this Agreement or on its behalf in
connection with this Agreement and the transactions contemplated by this Agreement (
Expenses
) shall be paid by the party incurring those Expenses, except (a) that Expenses incurred in connection with the filing, printing and
mailing of the Proxy Materials and the filing fee under the HSR Act shall be shared equally by Parent and the Company and (b) as otherwise provided in Section 7.5.
Section 5.18 Takeover Statutes. If any Takeover Statute is or becomes applicable to this Agreement, the Merger or the other transactions contemplated by this Agreement, each of Parent and the Company
and their respective boards of directors shall take all necessary action to ensure that such transactions may be consummated as promptly as practicable upon the terms and subject to the conditions set forth in this Agreement and otherwise act to
eliminate or minimize the effects of such Takeover Statute.
Section 5.19 Defense of Litigation. The Company shall give
Parent the opportunity to participate in the defense of any Legal Action against the Company or its Subsidiaries and/or their respective directors and/or officers relating to the transactions contemplated by this Agreement. The Company shall not
settle or offer to settle any such Legal Action without the prior written consent of Parent, not to be unreasonably withheld. Subject to Section 5.4(d), the Company shall not substantively cooperate with any Person that may seek to restrain,
enjoin, prohibit or otherwise oppose the transactions contemplated by this Agreement, and the Company shall cooperate with Parent and Merger Sub in resisting any such effort to restrain, enjoin, prohibit or otherwise oppose such transactions.
Section 5.20 Maintenance and Prosecution of Intellectual Property by the Company.
(a) The Company shall take all reasonable actions to protect and maintain the Company Intellectual Property Rights,
including diligently prosecuting all pending applications for Patents or registration of Trademarks and Copyrights and maintaining each Patent or registration owned by the Company in a manner consistent with past practices. The Company shall make
back-ups of all material Software (excluding Off-the Shelf Software) and databases as permitted by Law and shall maintain such Software and databases at a secure off-site location.
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(b) The Company shall promptly notify Parent (i) if it knows, or has
reasonable grounds to suspect, that any material Company Intellectual Property Rights may become abandoned or dedicated to the public domain, (ii) it has received notice of any adverse determination or development (including the institution of,
or any such determination or development in, any proceeding in the United States Patent and Trademark Office (the
U.S. PTO
) or the United States Copyright Office (the
U.S. Copyright Office
) or equivalent office
in any other jurisdiction, any court or tribunal in the United States or any political sub-division thereof, or any court or tribunal in any other jurisdiction), other than non-final determinations of the U.S. PTO or the U.S. Copyright Office (or
equivalent office in any other jurisdiction), regarding its ownership of any Company Intellectual Property Rights or its right to register the same or to keep, maintain and/or use the same.
(c) The Company shall promptly notify Parent of any material infringement of any Company Intellectual Property Rights of
which it becomes aware and shall consult with Parent regarding the actions to take to protect such Company Intellectual Property Rights.
Section 5.21 Maintenance and Prosecution of Intellectual Property by Parent.
(a) Parent shall take all reasonable actions to protect and maintain the Parent Intellectual Property Rights, including diligently prosecuting all pending applications for Patents or registration of
Trademarks and Copyrights and maintaining each Patent or registration owned by Parent in a manner consistent with past practice. Parent shall make back-ups of all material Software (excluding Off-the Shelf Software) and databases as permitted by Law
and shall maintain such Software and databases at a secure off-site location.
(b) Parent shall promptly notify
the Company (i) if it knows, or has reasonable grounds to suspect, that any material Parent Intellectual Property Rights may become abandoned or dedicated to the public domain, (ii) it has received notice of any adverse determination or
development (including the institution of, or any such determination or development in, any proceeding in the U.S. PTO or the U.S. Copyright Office or equivalent office in any other jurisdiction, any court or tribunal in the United States or any
political sub-division thereof, or any court or tribunal in any other jurisdiction), other than non-final determinations of the U.S. PTO or the U.S. Copyright Office (or equivalent officer in any other jurisdiction), regarding its ownership of any
Parent Intellectual Property Rights or its right to register the same or to keep, maintain and/or use the same.
(c) Parent shall promptly notify the Company of any material infringement of any Parent Intellectual Property Rights of
which it becomes aware and shall consult with the Company regarding the actions to take to protect such Parent Intellectual Property Rights.
Section 5.22 Tax Matters. During the period from the date hereof to the Effective Time, Parent and the Company shall and shall cause each of their respective Subsidiaries to use commercially reasonable
efforts to:
(a) prepare and timely file all material Tax Returns required to be filed by it (or them) on or
before the Closing Date (
Post-Signing Returns
) in a manner consistent with past practice, except as otherwise required by applicable Laws;
(b) fully and timely pay all material Taxes shown as due and payable on such Post-Signing Returns that are so filed; and
(c) with respect to the Company and its Subsidiaries, promptly notify Parent of any material Legal Action or audit pending
or threatened against the Company or any of its Subsidiaries in respect of any Tax matter and not settle or compromise any such Legal Action or audit without Parents prior written consent (not to be unreasonably withheld) and not make or
revoke any material Tax election or adopt or change a Tax accounting method without Parents prior written consent (not to be unreasonably withheld).
Section 5.23 Third Party Consents. Each of Parent and the Company shall use commercially reasonable efforts to obtain any consents, waivers and approvals under any Company Contracts that may be
required in connection with the Merger and the parties shall consult with each other in determining which consents, waivers and approvals should be sought;
provided
, that the failure to comply with this Section 5.23 shall not be
considered a breach of or failure to perform this Agreement.
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Section 5.24 Israeli Tax Rulings.
(a) As soon as reasonably practicable after the execution of this Agreement, the Company shall cause its Israeli counsel,
in consultation with Parent and its counsel, advisors and/or accountants, to prepare and file with the ITA one or more applications:
(i) confirming that (x) the deposit with the Trustee of the ADSs (and Cash Consideration, if applicable) for Company Options, Company RSUs, and for Company Common Stock obtained upon the exercise of
Company Options, which are subject to the statutory holding period under Section 102 of the ITO, will not result in a requirement for an immediate Israeli Tax payment and that the Israeli taxation will be deferred until the completion of such
statutory holding period; (y) that the statutory holding period applied with respect to Company Options, Company RSUs, and Company Common Stock subject to Section 102 of the ITO will continue uninterrupted from the original date of grant
and will not recommence as a result of the transactions contemplated herein;
provided
, that (1) the applicable options for ADSs delivered to the holders of Company Common Stock are deposited with the Trustee for duration of the statutory
holding period, and (2) the applicable options for ADSs delivered to the holders of Company Options and Company RSUs shall be subject to the longer of (A) the contractual vesting terms that applied to such Company Options and Company RSUs,
and (B) the duration of the statutory holding period; and (z) such other ruling or relief as the parties may agree is appropriate to request under the circumstances (which ruling may be subject to customary conditions regularly associated
with such a ruling) (the
Israeli Options Tax Ruling
); and
(ii) that either (x) exempts
Parent, the Company, the Exchange Agent and their respective agents from any obligation to withhold Israeli Tax at source from any consideration deliverable pursuant to this Agreement, or clarifying that no such obligation exists, or
(y) clearly instructs Parent, the Company, the Exchange Agent and their respective agents how such withholding at source is to be performed, and in particular, with respect to the classes or categories of holders or former holders of Company
Common Stock from which Tax is to be withheld (if any), and the rate or rates of withholding to be applied (
General Ruling
and together with the Israeli Options Ruling, the
Israeli Tax Rulings
).
(b) The Company shall, and shall instruct its Representatives to, cooperate with Parent, its Israeli counsel and its other
Representatives with respect to the preparation and filing of such applications and in the preparation of any written or oral submissions that may be necessary, proper or advisable to obtain the Israeli Tax Rulings. Subject to the terms and
conditions hereof, the Company shall use commercially reasonable efforts to promptly take, or cause to be taken, all action and to do, or cause to be done, all things necessary, proper or advisable under applicable Law to obtain the Israeli Tax
Rulings, as promptly as practicable. Neither the Company nor any of its Representatives shall make any application to, or conduct any negotiation with, the ITA with respect to any matter relating to the subject matter of the Israeli Tax Rulings
without prior coordination with Parent or its Representatives, and the Company will enable Parents Representatives to participate in all discussions and meetings relating thereto. To the extent that Parents Representatives elect not to
participate in any meeting or discussion, the Companys Representatives shall provide Parent with a prompt and full report of the discussions held. In any event, the final text of the Israeli Tax Rulings shall in all circumstances be subject to
the prior written consent of Parent, which consent shall not be unreasonably withheld or delayed.
Section 5.25 Israeli
Securities Authority Application. As soon as reasonably practicable after the execution of this Agreement, the Parent shall cause its Israeli counsel to prepare and file with the Israeli Securities Authority an application for an exemption from
the requirements of the Israeli Securities Law, 5728-1968 concerning the publication of a prospectus in respect of (i) options for ADSs exchanged in connection with the transaction hereunder, pursuant to Section 15D of the Securities Law
of Israel, and (ii) ADSs issued to stockholders of the Company in connection with the transaction hereunder (
ISA Approval
). The Company shall cooperate with the Parent in connection with the preparation and filing of such
application and in the preparation of any written or oral submissions that may be necessary, proper or advisable to obtain such exemption.
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ARTICLE VI
CONDITIONS
Section 6.1 Conditions to Each Partys Obligation to
Effect the Merger. The respective obligation of each party to this Agreement to effect the Merger is subject to the satisfaction or waiver on or prior to the Closing Date of each of the following conditions:
(a)
Company Stockholder Approval
. This Agreement shall have been duly adopted by the Requisite Company Vote.
(b)
Parent Shareholder Approval
. The transactions contemplated by this Agreement shall have been
approved by the Requisite Parent Vote.
(c)
Listing
. The ADSs to be issued in the Merger shall have been
approved for listing on The NASDAQ Stock Market, subject to official notice of issuance, and the Parent Ordinary Shares underlying the ADSs issuable to the stockholders of the Company pursuant to this Agreement shall have been admitted to the
Official List of the UKLA and to trading on the London Stock Exchanges main market for listed securities (and such admission shall have become effective subject only to allotment).
(d)
Antitrust
. The waiting period applicable to the consummation of the Merger under the HSR Act shall have expired
or been terminated.
(e)
No Injunctions or Restraints
. No Governmental Entity has enacted, issued,
promulgated, enforced or entered any Laws or Orders (whether temporary, preliminary or permanent) that (i) restrain, enjoin or otherwise prohibit consummation of the Merger or (ii) relates to the transactions contemplated hereby and would
reasonably be expected to have a Parent Material Adverse Effect or a Company Material Adverse Effect after giving effect to the Merger. No Governmental Entity shall have instituted any proceeding seeking any such Laws or Orders.
(f)
Form F-4 Registration Statement
. The Form F-4 Registration Statement and the Form F-6 Registration Statement
shall have become effective under the Securities Act and the Form 8-A Registration Statement shall have become effective under the Exchange Act, no stop order suspending the effectiveness of the Form F-4 Registration Statement, the Form F-6
Registration Statement or the Form 8-A Registration Statement shall have been issued, and no proceedings for that purpose has been initiated or be threatened by the SEC and not concluded or withdrawn.
Section 6.2 Conditions to Obligations of Parent and Merger Sub. The obligations of each of Parent and Merger Sub to effect the
Merger are also subject to the satisfaction or waiver by Parent on or prior to the Closing Date of the following conditions:
(a)
Representations and Warranties
. The representations and warranties of the Company set forth in this Agreement (other than the representations and warranties set forth in Section 3.32)
shall be true and correct as though made on and as of the Closing Date (except for representations or warranties made as of a specified date, the accuracy of which shall be determined as of that specified date), except where the failure of such
representations and warranties to be true and correct (without giving effect, except in the case of the first sentence of Section 3.16, to any limitation as to
materiality
or
Company Material Adverse Effect
set forth therein) has not had and would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect, and the representations and warranties of the Company set forth in Section 3.32 shall have been
true and correct in all material respects as of the date hereof.
(b)
Performance of Obligations
. The
Company shall have performed in all material respects all obligations required to be performed by it under this Agreement at or prior to the Closing Date.
(c)
No Company Material Adverse Effect
. No effect, event, change, occurrence, circumstance or development shall have occurred since December 31, 2010 or exist that has had or would reasonably
be expected to have, individually or in the aggregate, a Company Material Adverse Effect.
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(d)
Officers Certificate
. Parent shall have received a
certificate signed on behalf of the Company by an executive officer of the Company as to the effect of Section 6.2(a), Section 6.2(b) and Section 6.2(c).
(e)
Israeli Approvals
. The Company shall have obtained the OCS Approval and the Investment Center Confirmation,
neither of which shall have been revoked or rescinded.
Section 6.3 Conditions to Obligation of the Company. The
obligation of the Company to effect the Merger is also subject to the satisfaction or waiver by the Company on or prior to the Closing Date of the following conditions:
(a)
Representations and Warranties
. The representations and warranties of Parent and Merger Sub set forth in this
Agreement (other than the representations and warranties set forth in Section 4.31) shall be true and correct as though made on and as of the Closing Date (except for representations or warranties made as of a specified date, the accuracy of
which shall be determined as of that specified date), except where the failure of such representations and warranties to be true and correct (without giving effect, except in the case of the first sentence of Section 4.15, to any limitation as
to
materiality
or
Parent Material Adverse Effect
set forth therein) has not had and would not reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect, and the
representations and warranties of Parent and Merger Sub set forth in Section 4.31 shall have been true and correct in all material respects as of the date hereof.
(b)
Performance of Obligations
. Each of Parent and Merger Sub shall have performed in all material respects all
obligations required to be performed by it under this Agreement at or prior to the Closing Date.
(c)
No
Parent Material Adverse Effect
. No effect, event, change, occurrence, circumstance or development shall have occurred since December 31, 2010 or exist that has had or would reasonably be expected to have, individually or in the aggregate, a
Parent Material Adverse Effect.
(d)
Officers Certificate
. The Company shall have received a
certificate signed on behalf of Parent by an executive officer of Parent as to the effect of Section 6.3(a), Section 6.3(b) and Section 6.3(c).
(e)
ADR Facility
. Parent shall have established the ADR Facility in accordance with Section 5.16.
(f)
Appointment of Company Appointees
. Parent shall have appointed the Company Appointee to the board of directors of Parent, subject to the effectiveness of the Merger.
Section 6.4 Frustration of Closing Conditions. None of the parties to this Agreement may rely on the failure of any condition set
forth in this Article VI to be satisfied if such failure was caused by such partys failure to fulfill any of its obligations under this Agreement.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
Section 7.1 Termination by Mutual Consent. This Agreement may be terminated at any time prior to the Effective Time by mutual
written consent of Parent and the Company.
Section 7.2 Termination by Either Parent or the Company. This Agreement may
be terminated by either Parent or the Company at any time prior to the Effective Time:
(a) if the Effective
Time has not occurred prior to 11:59 p.m. (New York City time) on December 31, 2011 (the
Outside Date
), except that the right to terminate this Agreement under this clause (a) shall not be available to any party to this
Agreement whose failure to fulfill any of its obligations hereunder (or under the Original Agreement prior to the date hereof) has been a principal cause of the failure to consummate the Merger by such date;
provided
,
however
, if on
the Outside Date the conditions to the Closing set forth in Section 6.1(d) or Section 6.1(f) shall not have been satisfied or waived, then the Outside Date shall be extended for an additional 60 days;
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(b) if this Agreement is not adopted by the Requisite Company Vote after a
vote thereon at a duly held Company Stockholders Meeting or adjournment or postponement thereof; or
(c) if the
transactions contemplated by this Agreement are not approved by the Requisite Parent Vote after a vote thereon at a duly held Parent Shareholders Meeting or adjournment thereof.
Section 7.3 Termination by Parent. This Agreement may be terminated by Parent at any time prior to the Effective Time if:
(a) (i) the board of directors of the Company withdraws, modifies, qualifies or amends the Company Board Recommendation in
any manner adverse to Parent, (ii) the board of directors of the Company approves, endorses or recommends any Takeover Proposal in respect of the Company, (iii) a tender offer or exchange offer that constitutes a Takeover Proposal in
respect of the Company is commenced and the board of directors of the Company fails to recommend against acceptance of such tender offer or exchange offer by its stockholders (including, for these purposes, by taking no position with respect to the
acceptance of such tender offer or exchange offer by its stockholders, which shall constitute a failure to recommend against acceptance of such tender offer or exchange offer) within ten Business Days after commencement, or (iv) the Company or
its board of directors publicly announce an intention to do any of the foregoing;
(b) the Company breaches any
of its covenants in Section 5.4 hereof in any material respect;
(c) a Company Material Adverse Effect
occurs following the date of the Original Agreement;
(d) the Company breaches any of its representations,
warranties, covenants or agreements contained in this Agreement, which breach (i) would give rise to the failure of a condition set forth in Section 6.2(a) or Section 6.2(b) and (ii) has not been cured by the Company within 20
Business Days after the Companys receipt of written notice of such breach from Parent; or
(e) prior to
obtaining the Requisite Parent Vote, provided Parent has complied with its obligations under Section 5.4 (including Section 5.4(d)(ii)) in all material respects, in order to enter into a Contract providing for a Superior Proposal, provided
that the terms of such Superior Proposal require Parent to terminate this Agreement as a condition to consummation of such Superior Proposal.
Section 7.4 Termination by the Company. This Agreement may be terminated by the Company:
(a) if (i) the board of directors of Parent withdraws, modifies, qualifies or amends the Parent Board Recommendation in any manner adverse to the Company, (ii) the board of directors of Parent
approves, endorses or recommends any Takeover Proposal in respect of Parent, (iii) a tender offer or exchange offer that constitutes a Takeover Proposal in respect of Parent is commenced and the board of directors of Parent fails to recommend
against acceptance of such tender offer or exchange offer by its stockholders (including, for these purposes, by taking no position with respect to the acceptance of such tender offer or exchange offer by its stockholders, which shall constitute a
failure to recommend against acceptance of such tender offer or exchange offer) within ten Business Days after commencement, or (iv) Parent or its board of directors publicly announce an intention to do any of the foregoing;
(b) if Parent breaches any of its covenants in Section 5.4 hereof in any material respect;
(c) if a Parent Material Adverse Effect occurs following the date of the Original Agreement;
(d) if Parent breaches any of its representations, warranties, covenants or agreements contained in this Agreement, which
breach (i) would give rise to the failure of a condition set forth in Section 6.3(a) or Section 6.3(b) and (ii) has not been cured by Parent within 20 Business Days after Parents receipt of written notice of such breach
from the Company; or
(e) prior to obtaining the Requisite Company Vote, provided the Company has complied with
its obligations under Section 5.4 (including Section 5.4(d)(ii)) in all material respects, in order to enter into a Contract providing for a Superior Proposal.
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Section 7.5 Effect of Termination.
(a) If this Agreement is terminated pursuant to this Article VII, it shall become void and of no further force and effect,
with no liability on the part of any party to this Agreement (or any stockholder, director, officer, employee, agent or representative of such party), except that if such termination results from the intentional (a) failure of any party to
perform its obligations hereunder or, prior to the date hereof, under the Original Agreement, or (b) breach by any party of its representations or warranties contained in this Agreement, then such party shall be fully liable for any Liabilities
incurred or suffered by the other parties as a result of such intentional failure or breach. The provisions of Section 5.17, Section 7.5 and Article VIII shall survive any termination of this Agreement.
(b) Except as set forth in this Section 7.5, all Expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid in accordance with the provisions of Section 5.17.
(c) The
Company shall pay, or cause to be paid, to Parent by wire transfer of immediately available funds an amount equal to (x) with respect to clauses (c)(ii) through (c)(iv) below, $8,600,000 or (y) with respect to clause (c)(i) below,
$12,700,000 (in each case subject to any reduction in its payment obligation under Section 7.5(f)), if:
(i) this Agreement is terminated by the Company pursuant to Section 7.4(e), such payment to be made before or
concurrently with such termination and in the absence of such payment any such purported termination shall be invalid;
(ii) (A) a Takeover Proposal in respect of the Company has been publicly made or proposed to the Companys stockholders or otherwise publicly announced (whether or not conditional) and not withdrawn,
(B) this Agreement is terminated by either Parent or the Company pursuant to Section 7.2(b) and (C) within six months following the date of such termination, the Company or any of its Subsidiaries enters into a Contract providing for
the implementation of a Takeover Proposal in respect of the Company (which Takeover Proposal is ultimately consummated) or consummates any Takeover Proposal in respect of the Company, whether or not such Takeover Proposal was the same Takeover
Proposal referred to in clause (A), such payment to be made upon the consummation of such Takeover Proposal;
(iii) this Agreement is terminated by Parent pursuant to Section 7.3(a), such payment to be made within two Business
Days of such termination, unless at the time of Parents termination the Company has the right to terminate this Agreement pursuant to Section 7.4(d), in which case no amount shall be payable pursuant to this Section 7.5(c)(iii); or
(iv) this Agreement is terminated by Parent pursuant to Section 7.3(b), such payment to be made within
two Business Days of such termination.
Notwithstanding anything in this Agreement to the contrary, the Company shall not be required to pay
to Parent the amount due pursuant to this Section 7.5(c) more than once.
(d) Parent shall pay, or cause
to be paid, to the Company by wire transfer of immediately available funds an amount equal to $8,600,000 (subject to any reduction in its payment obligation under Section 7.5(f)) if:
(i) this Agreement is terminated by Parent pursuant to Section 7.3(e), such payment to be made before or concurrently
with such termination and in the absence of such payment any such purported termination shall be invalid;
(ii)
(A) a Takeover Proposal in respect of Parent has been publicly made or proposed to the Parents stockholders or otherwise publicly announced (whether or not conditional) and not withdrawn, (B) this Agreement is terminated by either Parent
or the Company pursuant to Section 7.2(c) and (C) within six months following the date of such termination, Parent or any of its Subsidiaries enters into a Contract providing for the implementation of a Takeover Proposal in respect of
Parent (which
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Takeover Proposal is ultimately consummated) or consummates any Takeover Proposal in respect of Parent, whether or not such Takeover Proposal was the same Takeover Proposal referred to in clause
(A), such payment to be made upon the consummation of such Takeover Proposal;
(iii) this Agreement is
terminated by the Company pursuant to Section 7.4(a), such payment to be made within two Business Days of such termination, unless at the time of the Companys termination Parent has the right to terminate this Agreement pursuant to
Section 7.3(d), in which case no amount shall be payable pursuant to this Section 7.5(d)(iii); or
(iv) this Agreement is terminated by the Company pursuant to Section 7.4(b), such payment to be made within two
Business Days of such termination.
Notwithstanding anything in this Agreement to the contrary, Parent shall not be required to pay to the
Company the amount due pursuant to this Section 7.5(d) more than once.
(e) The parties hereto acknowledge
that (i) the agreements contained in this Section 7.5 are an integral part of the transactions contemplated by this Agreement and (ii) without these agreements, the parties would not have entered into this Agreement. Accordingly, if
either party fails promptly to pay any amount payable by it pursuant to this Section 7.5, and, in order to obtain such payment, the other party commences a suit which results in a judgment against the non-paying party for the payment set forth
in this Section 7.5, the non-paying party shall pay to the other party its costs and expenses (including attorneys fees, charges and disbursements) in connection with such suit, together with interest on the amount due from each date for
payment until the date of such payment at the prime rate of Citibank N.A. in effect on the date such payment was required to be made plus 2 percent.
(f) The parties to this Agreement intend, and shall use all reasonable endeavors to secure, that any amounts payable pursuant to Section 7.5(c) and Section 7.5(d) are not treated for VAT
purposes as consideration for a taxable supply. In circumstances where a payment falls to be made in accordance with Section 7.5(c) or Section 7.5(d), if and to the extent that any relevant Tax authority determines that the amount which
would otherwise be payable pursuant to Section 7.5(c) or Section 7.5(d) but for the adjustment required pursuant to this section 7.5(f) (each, a
Termination Fee
) is consideration for a taxable supply, that the party
paying the Termination Fee (or the representative member of a VAT Group of which that party is a member) is liable to account to a Tax authority for VAT in respect of such supply and all or any part of such VAT is Irrecoverable VAT, then:
(i) the amount payable by such party pursuant to Section 7.5(c) or Section 7.5(d) shall be reduced
so that the amount payable, together with any Irrecoverable VAT arising in respect of the supply for which the payment is consideration, is equal to the Termination Fee; and
(ii) to the extent that such party has already paid an amount in respect of the Termination Fee which exceeds the amount
described in Section 7.5(f)(i) above, the other party shall repay to such party such amount as will ensure that the aggregate amount paid by such party pursuant to Section 7.5(c) or Section 7.5(d), together with the Irrecoverable VAT
mentioned in Section 7.5(f)(i) above and less the repayment mentioned in this Section 7.5(f)(ii), is equal to the Termination Fee.
Section 7.6 Amendment. This Agreement may be amended by the parties to this Agreement at any time prior to the Effective Time, so long as (a) no amendment that requires stockholder or
shareholder approval under applicable Laws shall be made without such required approval and (b) such amendment has been duly approved by the board of directors of each of Parent, Merger Sub and the Company. This Agreement may not be amended
except by an instrument in writing signed by each of the parties to this Agreement.
Section 7.7 Extension; Waiver. At
any time prior to the Effective Time, Parent and Merger Sub, on the one hand, and the Company, on the other hand, may (a) extend the time for the performance of any of the obligations of the other party, (b) waive any inaccuracies in the
representations and warranties of the other party contained in
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this Agreement or in any document delivered under this Agreement or, (c) subject to applicable Laws, waive compliance with any of the covenants or conditions contained in this Agreement. Any
agreement on the part of a party to any extension or waiver shall be valid only if set forth in an instrument in writing signed by such party. The failure or delay of any party to assert any of its rights under this Agreement or otherwise shall not
constitute a waiver of such rights.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Interpretation. The table of contents and headings in this Agreement are for reference only and shall not affect the meaning or interpretation of this Agreement. Definitions shall apply
equally to both the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. All references in this Agreement to Articles, Sections and
Exhibits shall refer to Articles and Sections of, and Exhibits to, this Agreement unless the context shall require otherwise. The words include, includes and including shall not be limiting and shall be
deemed to be followed by the phrase without limitation. Unless the context shall require otherwise, any agreements, documents, instruments or Laws defined or referred to in this Agreement shall be deemed to mean or refer to such
agreements, documents, instruments or Laws as from time to time amended, modified or supplemented, including (a) in the case of agreements, documents or instruments, by waiver or consent and (b) in the case of Laws, by succession of
comparable successor statutes. All references in this Agreement to any particular Law shall be deemed to refer also to any rules and regulations promulgated under that Law. References to a person also refer to its predecessors and permitted
successors and assigns. When reference is made in this Agreement to information that has been made available, then (a) with respect to information that has been made available to Parent, that shall mean that such information was
either (i) included in the Company Public Reports or (ii) included in the Companys electronic data room no later than 11:59 p.m. (Pacific time), on February 19, 2011, and (b) with respect to information that has been made
available to the Company, that shall mean that such information was either (i) included in the Parent Public Reports or (ii) included in Parents electronic data room no later than 11:59 p.m. (Pacific time), on February 19, 2011.
Section 8.2 Survival. None of the representations and warranties contained in this Agreement or in any instrument
delivered under this Agreement shall survive the Effective Time. This Section 8.2 will not limit any covenant or agreement of the parties to this Agreement that, by its terms, contemplates performance after the Effective Time.
Section 8.3 Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware,
without regard to the laws that might otherwise govern under applicable principles of conflicts of law.
Section 8.4
Submission to Jurisdiction. Each of the parties hereto hereby irrevocably and unconditionally submits, for itself and its property, to the exclusive jurisdiction of the Delaware Court of Chancery (and if jurisdiction in the Delaware Court of
Chancery shall be unavailable, the Federal courts of the United States of America of the District of Delaware), and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or the agreements
delivered in connection herewith or the transactions contemplated hereby or thereby, and each of the parties hereby irrevocably and unconditionally (i) agrees not to commence any such action or proceeding except in Delaware Court of Chancery
(and if jurisdiction in the Delaware Court of Chancery shall be unavailable, the Federal courts of the United States of America of the District of Delaware), (ii) agrees that any claim in respect of any such action or proceeding may be heard
and determined in Delaware Court of Chancery (and if jurisdiction in the Delaware Court of Chancery shall be unavailable, the Federal courts of the United States of America of the District of Delaware), and any appellate court from any thereof,
(iii) waives, to the fullest extent it may legally and effectively do so, any objection which
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it may now or hereafter have to the laying of venue of any such action or proceeding in the Delaware Court of Chancery (and if jurisdiction in the Delaware Court of Chancery shall be unavailable,
the Federal courts of the United States of America of the District of Delaware), and (iv) waives, to the fullest extent it may legally and effectively do so, the defense of an inconvenient forum to the maintenance of such action or proceeding
in Delaware Court of Chancery (and if jurisdiction in the Delaware Court of Chancery shall be unavailable, the Federal courts of the United States of America sitting in the State of Delaware). Each of the parties hereto agrees that a final judgment
in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by Law. Each party to this Agreement irrevocably consents to service of process in the manner
provided for notices in Section 8.6. Nothing in this Agreement will affect the right of any party to this Agreement to serve process in any other manner permitted by Law.
Section 8.5 Waiver of Jury Trial.
EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES AND, THEREFORE,
EACH SUCH PARTY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LEGAL ACTION ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT
. Each party to this
Agreement certifies and acknowledges that (a) no Representative of any other party has represented, expressly or otherwise, that such other party would not seek to enforce the foregoing waiver in the event of a Legal Action, (b) such party
has considered the implications of this waiver, (c) such party makes this waiver voluntarily, and (d) such party has been induced to enter into this Agreement by, among other things, the mutual waivers and certifications in this
Section 8.5.
Section 8.6 Notices. Any notice, request, instruction or other communication under this Agreement
shall be in writing and delivered by hand or international courier service, by (other than with respect to the Company) facsimile (with written confirmation of transmission) or by electronic mail, with a copy thereof delivered or sent as provided
above:
If to Parent or Merger Sub, to:
Churchill House
Cambridge Business Park
Cowley Road
Cambridge, CB4 0WZ
United Kingdom
|
|
|
Facsimile:
|
|
+44 (0)1223 692005
|
Attention:
|
|
Will Gardiner, Chief Financial Officer; and
|
|
|
Adam Dolinko, Senior Vice President and General Counsel
|
E-mail:
|
|
will.gardiner@csr.com; and
|
|
|
Adam.Dolinko@csr.com
|
with a copy to:
Wilson Sonsini Goodrich & Rosati, Professional Corporation
650 Page Mill
Road
Palo Alto, California 94304
United States of America
Facsimile: +1 650 493 6811
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|
|
|
Attention:
|
|
David J. Segre
|
E-mail:
|
|
dsegre@wsgr.com
|
and:
Slaughter and May
One Bunhill Row
London EC1Y 8YY
United Kingdom
|
|
|
Facsimile:
|
|
+44 (0) 20 7090 5000
|
Attention:
|
|
William Underhill
|
E-mail:
|
|
william.underhill@slaughterandmay.com
|
If to the Company, to:
1390 Kifer Road
Sunnyvale, California 94086
United States of America
|
|
|
Facsimile:
|
|
+1 408 523 6501
|
Attention:
|
|
General Counsel
|
E-mail:
|
|
chris.denten@zoran.com
|
with a copy to:
Jones Day
1755 Embarcadero Road
Palo Alto, California 94303
|
|
|
Facsimile:
|
|
+1 650 739 3900
|
Attention:
|
|
Daniel R. Mitz
|
|
|
Christopher J. Hewitt
|
|
|
Timothy Curry
|
E-mail:
|
|
drmitz@jonesday.com
|
|
|
cjhewitt@jonesday.com
|
|
|
tcurry@jonesday.com
|
or to such other Persons, addresses or facsimile numbers as may be designated in writing by the Person entitled to
receive such communication as provided above. Each such communication shall be effective (a) if delivered by hand or international courier service, when such delivery is made at the address specified in this Section 8.6, (b) if
delivered by facsimile, when such facsimile is transmitted to the facsimile number specified in this Section 8.6 and appropriate confirmation is received, or (c) if delivered by electronic mail, when transmitted to the e-mail address
specified in this Section 8.6 and appropriate confirmation is received.
Section 8.7 Entire Agreement. This
Agreement (including the Exhibits to this Agreement), the Company Disclosure Letter, the Parent Disclosure Letter and the Confidentiality Agreement constitute the entire agreement and supersede all other prior agreements (including the Original
Agreement), understandings, representations and warranties, both written and oral, among the parties to this Agreement with respect to the subject matter of this Agreement. No representation, warranty, inducement, promise, understanding or condition
not set forth in this Agreement has been made or relied upon by any of the parties to this Agreement.
Section 8.8 No
Third-Party Beneficiaries. Except as provided in Section 5.10, this Agreement is not intended to confer any rights or remedies upon any Person other than the parties to this Agreement.
A-68
Section 8.9 Severability. The provisions of this Agreement shall be deemed severable
and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the other provisions of this Agreement. If any provision of this Agreement, or the application of that provision to any Person or any
circumstance, is invalid or unenforceable, (a) a suitable and equitable provision shall be substituted for that provision in order to carry out, so far as may be valid and enforceable, the intent and purpose of the invalid or unenforceable
provision and (b) the remainder of this Agreement and the application of that provision to other Persons or circumstances shall not be affected by such invalidity or unenforceability, nor shall such invalidity or unenforceability affect the
validity or enforceability of that provision, or the application of that provision, in any other jurisdiction.
Section 8.10
Rules of Construction. The parties to this Agreement have been represented by counsel during the negotiation and execution of this Agreement and waive the application of any Laws or rule of construction providing that ambiguities in any
agreement or other document shall be construed against the party drafting such agreement or other document.
Section 8.11
Assignment. This Agreement shall not be assignable by operation of law or otherwise, except that Parent may designate, by written notice to the Company, a Subsidiary that is wholly-owned by Parent to be merged with and into the Company in lieu
of Merger Sub, in which event all references in this Agreement to Merger Sub shall be deemed references to such Subsidiary, and in that case, all representations and warranties made in this Agreement with respect to Merger Sub as of the date of the
Original Agreement (and, where applicable, as of the date of this Agreement) shall be deemed representations and warranties made with respect to such Subsidiary as of the date of such designation.
Section 8.12 Remedies. Except as otherwise provided in this Agreement, any and all remedies expressly conferred upon a party to this
Agreement shall be cumulative with, and not exclusive of, any other remedy contained in this Agreement, at law or in equity. The exercise by a party to this Agreement of any one remedy shall not preclude the exercise by it of any other remedy.
Section 8.13 Specific Performance. The parties to this Agreement agree that irreparable damage would occur in the event
that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties to this Agreement shall be entitled to an injunction or injunctions to
prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement in any court of the United States or any state having jurisdiction, this being in addition to any other remedy to which they are entitled at
law or in equity, and neither party shall oppose any motion or other action seeking any such injunction to enforce Section 8.4.
Section 8.14 Counterparts; Effectiveness. This Agreement may be executed in any number of counterparts, all of which shall be one and the same agreement. This Agreement shall become effective when
each party to this Agreement has received counterparts signed by all of the other parties.
Section 8.15 Parent
Assurance. Parent agrees to cause Merger Sub to comply with all of its obligations hereunder and shall be fully responsible for any failure of Merger Sub to comply with its obligations hereunder to the same extent as if Parent were directly
obligated.
Section 8.16 Acknowledgements. The parties agree and acknowledge that neither the Parent Disclosure Letter (in
respect of Article IV) nor the Company Disclosure Letter (in respect of Article III) were updated as of the date of this Agreement, and that the failure to disclose any event or state of facts that has occurred or arisen since the date of the
Original Agreement that would be necessary to make any representation or warranty contained in Article III or Article IV true will not be considered a misrepresentation or inaccuracy of such representation or warranty except to the extent that such
event or state of facts would result in a failure of the conditions set forth in Section 6.2(a) or Section 6.3(a).
[Signature page follows]
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IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by the duly
authorized officers of the parties to this Agreement as of the date first written above.
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CSR PLC
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By:
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/s/ Joep van Beurden
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Name:
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Joep van Beurden
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Title:
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Chief Executive Officer
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ZEISS MERGER SUB, INC.
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By:
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/s/ Will Gardiner
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Name:
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Will Gardiner
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Title:
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Chief Financial Officer
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ZORAN CORPORATION
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By:
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/s/ Levy Gerzberg
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Name:
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Levy Gerzberg
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Title:
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President and Chief Executive Officer
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A-70
APPENDIX BOPINION OF ZORANS FINANCIAL ADVISOR
PERSONAL AND CONFIDENTIAL
June 16, 2011
Board of Directors
Zoran Corporation
1390 Kifer Road
Sunnyvale, CA 94086
Gentlemen:
You have requested our opinion as to the fairness from a financial point of view to the holders (other than CSR plc (CSR) and its affiliates) of the outstanding shares of common stock, par
value $0.001 per share (the Shares), of Zoran Corporation (the Company) of the Consideration (as defined below) to be paid to such holders pursuant to the Amended and Restated Agreement and Plan of Merger, dated as of
June 16, 2011 (the Amended Agreement), by and among CSR, Zeiss Merger Sub, Inc. (Merger Sub), a direct, wholly-owned subsidiary of CSR, and the Company. The Amended Agreement provides that Merger Sub will be merged with and
into the Company and each outstanding Share will be converted into $6.26 in cash (the Cash Consideration) and 0.14725 American Depositary Shares (ADS) (which is equivalent to 0.589 CSR Ordinary Shares (as defined below)),
with each ADS representing 4 ordinary shares, par value £0.001 per share (the CSR Ordinary Shares), of CSR (the Stock Consideration; together with the Cash Consideration, the Consideration).
Goldman, Sachs & Co. and its affiliates are engaged in investment banking and financial advisory services, commercial banking, securities trading,
investment management, principal investment, financial planning, benefits counseling, risk management, hedging, financing, brokerage activities and other financial and non-financial activities and services for various persons and entities. In the
ordinary course of these activities and services, Goldman, Sachs & Co. and its affiliates may at any time make or hold long or short positions and investments, as well as actively trade or effect transactions, in the equity, debt and other
securities (or related derivative securities) and financial instruments (including bank loans and other obligations) of third parties, the Company, CSR and any of their respective affiliates or any currency or commodity that may be involved in the
transaction contemplated by the Agreement (the Transaction) for their own account and for the accounts of their customers. We have acted as financial advisor to the Company in connection with, and have participated in certain of the
negotiations leading to, the Transaction. We expect to receive fees for our services in connection with the Transaction, the principal portion of which is contingent upon consummation of the Transaction, and the Company has agreed to reimburse our
expenses arising, and indemnify us against certain liabilities that may arise, out of our engagement. We have provided certain investment banking services to the Company and its affiliates from time to time for which our Investment Banking Division
has received, and may receive, compensation, including having acted as financial advisor to the Company in connection with the proxy solicitation to change the composition of the Companys Board of Directors. We may also in the future provide
investment banking services to the Company, CSR and their respective affiliates for which our Investment Banking Division may receive compensation.
In connection with this opinion, we have reviewed, among other things, the Amended Agreement; Agreement and Plan of Merger, dated as of February 20, 2011, by and among CSR, Merger Sub and the Company;
registration statement no. 333-173590 on Form F-4 filed with the SEC on April 19, 2011; annual reports on Form 10-K of the Company for the five years ended December 31, 2010; annual reports to shareholders of CSR for the five years ended December
31, 2010 and annual reports on Form 20-F of CSR for the two years ended December 31, 2010 and January 1, 2010; certain interim reports to stockholders and Quarterly Reports on Form 10-Q of the
B-1
Company and Form 6-K of CSR; certain other communications from the Company and CSR to their respective stockholders; certain publicly available research analyst reports for the Company and CSR;
and the most recent internal financial analyses and forecasts for the Company and CSR prepared by the Companys management, in each case, as approved for our use by the Company (the Revised Forecasts), and the most recent revenue,
cost of goods sold and operating expense synergies projected by the management of the Company to result from the Transaction, as approved for our use by the Company (the Revised Synergies). We have also held discussions with members of
the senior managements of the Company and CSR regarding their assessment of the strategic rationale for, and the potential benefits of, the Transaction and the past and current business operations, financial condition and future prospects of their
respective companies; reviewed the reported price and trading activity for the Shares and CSR Ordinary Shares; compared certain financial and stock market information for the Company and CSR with similar information for certain other companies the
securities of which are publicly traded; reviewed the financial terms of certain recent business combinations in the semiconductor industry; and performed such other studies and analyses, and considered such other factors, as we deemed appropriate.
For purposes of rendering this opinion, we have relied upon and assumed, without assuming any responsibility for independent verification,
the accuracy and completeness of all of the financial, legal, regulatory, tax, accounting and other information provided to, discussed with or reviewed by, us; and we do not assume any responsibility for any such information. In that regard, we have
assumed with your consent that the Revised Forecasts and the Revised Synergies have been reasonably prepared on a basis reflecting the best currently available estimates and judgments of the management of the Company. We have not made an independent
evaluation or appraisal of the assets and liabilities (including any contingent, derivative or other off-balance-sheet assets and liabilities) of the Company or CSR or any of their respective subsidiaries and we have not been furnished with any such
evaluation or appraisal. We have assumed that all governmental, regulatory or other consents and approvals necessary for the consummation of the Transaction will be obtained without any adverse effect on the Company or CSR or on the expected
benefits of the Transaction in any way meaningful to our analysis. We also have assumed that the Transaction will be consummated on the terms set forth in the Amended Agreement, without the waiver or modification of any term or condition the effect
of which would be in any way meaningful to our analysis.
Our opinion does not address the underlying business decision of the Company to
engage in the Transaction, or the relative merits of the Transaction as compared to any strategic alternatives that may be available to the Company; nor does it address any legal, regulatory, tax or accounting matters. This opinion addresses only
the fairness from a financial point of view, as of the date hereof, of the Consideration to be paid to the holders (other than CSR and its affiliates) of Shares pursuant to the Amended Agreement. We do not express any view on, and our opinion does
not address, any other term or aspect of the Amended Agreement or Transaction or any term or aspect of any other agreement or instrument contemplated by the Amended Agreement or entered into or amended in connection with the Transaction, including,
without limitation, the fairness of the Transaction to, or any consideration received in connection therewith by, the holders of any other class of securities, creditors, or other constituencies of the Company; nor as to the fairness of the amount
or nature of any compensation to be paid or payable to any of the officers, directors or employees of the Company, or class of such persons, in connection with the Transaction, whether relative to the Consideration to be paid to the holders (other
than CSR and its affiliates) of Shares pursuant to the Amended Agreement or otherwise. We are not expressing any opinion as to the prices at which the ADSs or CSR Ordinary Shares will trade at any time or as to the impact of the Transaction on
the solvency or viability of the Company or CSR or the ability of the Company or CSR to pay its obligations when they come due. Our opinion is necessarily based on economic, monetary, market and other conditions as in effect on, and the information
made available to us as of, the date hereof and we assume no responsibility for updating, revising or reaffirming this opinion based on circumstances, developments or events occurring after the date hereof. Our advisory services and the opinion
expressed herein are provided for the information and assistance of the Board of Directors of the Company in connection with its consideration of the Transaction and such opinion does not constitute a recommendation as to how any holder of Shares
should vote with respect to such Transaction or any other matter. This opinion has been approved by a fairness committee of Goldman, Sachs & Co.
B-2
Based upon and subject to the foregoing, it is our opinion that, as of the date hereof, the Consideration to
be paid to holders (other than CSR and its affiliates) of Shares pursuant to the Amended Agreement is fair from a financial point of view to such holders.
Very truly yours,
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/s/ Goldman, Sachs & Co.
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(GOLDMAN, SACHS & CO.)
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B-3
APPENDIX CFORM OF ZORAN VOTING AGREEMENT
C-1
VOTING AGREEMENT
THIS VOTING AGREEMENT (this
Agreement
) is made and entered into as of June [__], 2011 by and between CSR plc, a
corporation organized under the laws of the United Kingdom (
Parent
), and the undersigned Stockholder (the
Stockholder
) of Zoran Corporation, a Delaware corporation (the
Company
).
WITNESSETH:
WHEREAS, Parent, Zeiss Merger Sub, Inc., a Delaware corporation and wholly-owned subsidiary of Parent (
Merger Sub
), and the Company have entered into an Amended and Restated
Agreement and Plan of Merger of even date herewith (as it may be amended from time to time, the
Amended Merger Agreement
), which provides for, among other things, the merger of Merger Sub with and into the Company (the
Merger
) with the Company continuing as the surviving corporation of the Merger and pursuant to which all outstanding shares of capital stock of the Company will be converted into the right to receive the consideration set forth in
the Amended Merger Agreement (the
Merger Consideration
).
WHEREAS, the Stockholder is the
beneficial owner (as defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the
Exchange Act
)) of that number of shares of the outstanding capital stock of the Company, and the holder of options to purchase
such number of shares of capital stock of the Company, in each case, as set forth on the signature page of this Agreement.
WHEREAS, as a condition and inducement to the willingness of Parent and Merger Sub to enter into the Amended Merger Agreement, the
Stockholder (in the Stockholders capacity as such) has agreed to enter into this Agreement.
NOW, THEREFORE, intending
to be legally bound, the parties hereto agree as follows:
1.
Certain Definitions
. All capitalized terms that are used
but not defined herein shall have the respective meanings ascribed to them in the Amended Merger Agreement. For all purposes of and under this Agreement, the following terms shall have the following respective meanings:
(a)
Expiration Date
shall mean the earliest to occur of (i) such date and time as the Amended
Merger Agreement shall have been validly terminated pursuant to Article VII thereof, (ii) such date and time as the Merger shall become effective in accordance with the terms and provisions of the Amended Merger Agreement, (iii) such date
and time as the Amended Merger Agreement shall have been validly amended to provide for a decrease in the Merger Consideration and (iv) such date and time as (x) the Company Board Recommendation or the Parent Board Recommendation shall
have been withdrawn, modified, qualified or amended, in each case in accordance with the provisions of Section 5.4 of the Amended Merger Agreement, or (y) Parent or the Company, as the case may be, shall have recommended a Takeover
Proposal with respect to such party, in each case in accordance with the provisions of Section 5.4 of the Amended Merger Agreement.
(b)
Person
shall mean any individual, corporation, limited liability company, general or limited partnership, trust, unincorporated association or other entity of any kind or nature, or
any governmental authority.
(c)
Shares
shall mean (i) all equity securities of the
Company (including all shares of Company Common Stock, Company Preferred Stock and all Company Stock Options and other rights to acquire shares of Company Common Stock) owned by the Stockholder as of the date hereof, and (ii) all additional
equity securities of the Company (including all additional shares of Company Common Stock, Company Preferred Stock and all additional Company Stock Options, warrants and other rights to acquire shares of Company Common Stock) of which the
Stockholder acquires ownership during the period from the date of this Agreement through the Expiration Date (including by way of stock dividend or distribution, split-up, recapitalization, combination, exchange of shares and the like).
C-2
(d)
Transfer
A Person shall be deemed to have effected a
Transfer
of a Share if such Person directly or indirectly (i) sells, pledges, encumbers, assigns, grants an option with respect to, transfers, tenders or disposes of such Share or any interest in such Share, or
(ii) enters into an agreement or commitment providing for the sale of, pledge of, encumbrance of, assignment of, grant of an option with respect to, transfer, tender of or disposition of such Share or any interest therein.
2.
Transfer of Shares
.
(a)
Transfer Restrictions
.
The Stockholder shall not Transfer (or cause or permit the Transfer of ) any of the Shares, or enter into any agreement relating thereto, except (i) by
selling already-owned Shares either to pay the exercise price upon the exercise of a Company Stock Option or to satisfy the Stockholders tax withholding obligation upon the exercise of a Company Stock Option, in each case as permitted by any
Company Option Plan, (ii) transferring Shares to Affiliates, immediate family members, a trust established for the benefit of the Stockholder and/or for the benefit of one or more members of the Stockholders immediate family or charitable
organizations or upon the death of the Stockholder,
provided that
, as a condition to such Transfer, the recipient agrees to be bound by this Agreement and delivers a Proxy (as defined below) in the form attached hereto as
Exhibit A
, or
(iii) with Parents prior written consent. Any Transfer, or purported Transfer, of Shares in breach or violation of this Agreement shall be void and of no force or effect.
(b)
Transfer of Voting Rights
.
The Stockholder shall not deposit (or cause or permit the deposit of) any
Shares in a voting trust or grant any proxy or enter into any voting agreement or similar agreement in contravention of the obligations of the Stockholder under this Agreement with respect to any of the Shares.
3.
Agreement to Vote Shares
.
(a) At every meeting of the stockholders of the Company, and at every adjournment or postponement thereof, and on every action or approval by written consent of the stockholders of Company, the
Stockholder (in the Stockholders capacity as such), to the extent not voted by the Person(s) appointed under the Proxy, shall, or shall cause the holder of record on any applicable record date to, vote all Shares that are then-owned by such
Stockholder and entitled to vote or act by written consent:
(i) in favor of the adoption of the Amended Merger
Agreement, and in favor of each of the other actions contemplated by the Amended Merger Agreement and any action required in furtherance thereof;
(ii) against approval of any proposal made in opposition to, in competition with, or would result in a breach of, the Amended Merger Agreement or the Merger or any other transactions contemplated by the
Amended Merger Agreement; and
(iii) against any of the following actions (other than those actions that relate
to the Merger and any other transactions contemplated by the Amended Merger Agreement): (A) any merger, consolidation, business combination, sale of assets, reorganization or recapitalization of or involving the Company or any of its
Subsidiaries, (B) any sale, lease or transfer of all or substantially all of the assets of the Company or any of its Subsidiaries, (C) any reorganization, recapitalization, dissolution, liquidation or winding up of the Company or any of
its Subsidiaries, (D) any material change in the capitalization of the Company or any of its Subsidiaries, or the corporate structure of the Company or any of its Subsidiaries, (E) any Takeover Proposal with respect to the Company, or
(F) any other action that is intended, or would reasonably be expected to, materially impede, interfere with, delay, postpone, discourage or adversely affect the Merger or any other transactions contemplated by the Amended Merger Agreement.
The Stockholder shall retain at all times the right to vote its Shares in its sole discretion and without any other limitation on those
matters other than those set forth in clauses (i), (ii) and (iii) that are at any time or from time to time presented for consideration to the Companys stockholders generally.
C-3
(b) In the event that a meeting of the stockholders of the Company is held,
the Stockholder shall, or shall cause the holder of record of the Shares on any applicable record date to, appear at such meeting or otherwise cause the Shares to be counted as present thereat for purposes of establishing a quorum.
(c) The Stockholder shall not enter into any agreement or understanding with any Person to vote or give instructions in
any manner inconsistent with the terms of this
Section 3
.
4.
Agreement Not to Exercise Appraisal Rights
.
The Stockholder shall not exercise, and hereby irrevocably and unconditionally waives, any statutory rights (including under Section 262 of the DGCL) to demand appraisal of any Shares that may arise in connection with the Merger.
Notwithstanding the foregoing, nothing in this
Section 4
shall constitute, or be deemed to constitute, a waiver or release by the Stockholder of any claim or cause of action against Parent or Merger Sub to the extent arising out of a
breach of this Agreement or the Amended Merger Agreement by Parent.
5.
Directors and Officers
. Notwithstanding any
provision of this Agreement to the contrary, nothing in this Agreement shall limit or restrict a Stockholder who is a director or officer of the Company from acting in such capacity or fulfilling the obligations of such office, including by voting,
in his capacity as a director of the Company, in the Stockholders sole discretion on any matter (it being understood that this Agreement shall apply to the Stockholder solely in the Stockholders capacity as a Stockholder of the Company),
including with respect to Section 5.4 of the Amended Merger Agreement. In this regard, the Stockholder shall not be deemed to make any agreement or understanding in this Agreement in the Stockholders capacity as a director or officer of
the Company, including with respect to Section 5.4 of the Amended Merger Agreement.
6.
Irrevocable Proxy
.
Concurrently with the execution of this Agreement, the Stockholder shall deliver to Parent a proxy in the form attached hereto as
Exhibit A
(the
Proxy
), which shall be irrevocable to the fullest extent permissible by law,
with respect to the Shares.
7.
Representations and Warranties of the Stockholder
. The Stockholder hereby represents
and warrants to Parent as follows:
(a)
Power; Binding Agreement
.
The Stockholder has full power
and authority to execute and deliver this Agreement and the Proxy, to perform the Stockholders obligations hereunder and to consummate the transactions contemplated hereby. This Agreement has been duly executed and delivered by the
Stockholder, and, assuming this Agreement constitutes a valid and binding obligation of Parent and Merger Sub, constitutes a valid and binding obligation of the Stockholder, enforceable against the Stockholder in accordance with its terms, except
that such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting or relating to creditors rights generally and is subject to general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or law).
(b)
No Conflicts
.
None of the execution and delivery by the Stockholder of this Agreement, the performance by the Stockholder of its obligations hereunder or the consummation by the Stockholder of the transactions contemplated hereby will (i) result in a
violation or breach of any agreement to which the Stockholder is a party or by which the Stockholder may be bound, including any voting agreement or voting trust, except for violations, breaches or defaults that would not in any material respect
impair or adversely effect the ability of the Stockholder to perform its obligations under this Agreement, or (ii) violate any order, writ, injunction, decree, judgment, statute, rule, or regulation applicable to the Stockholder.
(c)
Ownership of Shares
.
The Stockholder (i) is the sole beneficial owner of the shares of Company
Common Stock set forth on the signature page of this Agreement, all of which are free and clear of any liens, adverse claims, charges, security interests, pledges or options, proxies, voting trusts or agreements, understandings or agreements, or any
other rights or encumbrances whatsoever (
Encumbrances
), (ii) is the sole holder of the Company Stock Options that are exercisable for the number of shares of Company Common Stock set forth on the signature page of this
Agreement, all of which Company Stock Options and
C-4
shares of Company Common Stock issuable upon the exercise of such Company Stock Options are, or in the case of Company Common Stock received upon exercise of an option after the date hereof will
be, free and clear of any Encumbrances, and (iii) except as set forth on the signature page to this Agreement, does not own, beneficially or otherwise, any securities of the Company other than the shares of Company Common Stock or Company Stock
Options, and shares of Company Common Stock issuable upon the exercise of such Company Stock Options, set forth on the signature page of this Agreement.
(d)
Voting Power
.
The Stockholder has or will have sole voting power with respect to all of the Shares, with no limitations, qualifications or restrictions on such rights, subject to
applicable federal securities laws and the terms of this Agreement.
(e)
No Finders Fees
. No
broker, investment banker, financial advisor, finder, agent or other Person is entitled to any brokers, finders, financial advisers or other similar fee or commission in connection with this Agreement based upon arrangements made
by or on behalf of the Stockholder in his or her capacity as such.
(f)
Reliance by Parent
. The
Stockholder understands and acknowledges that Parent is entering into the Amended Merger Agreement in reliance upon the Stockholders execution and delivery of this Agreement.
8.
Certain Restrictions
. The Stockholder shall not, directly or indirectly, take any voluntary action that would make any
representation or warranty of the Stockholder contained herein untrue or incorrect in any material respect.
9.
Disclosure
. The Stockholder shall permit Parent to publish and disclose in all documents and schedules filed with the SEC, and any press release or other disclosure document that Parent reasonably determines to be necessary or desirable in
connection with the Merger and any transactions related to the Merger, the Stockholders identity and ownership of Shares and the nature of the Stockholders commitments, arrangements and understandings under this Agreement.
10.
No Ownership Interest
. Nothing contained in this Agreement shall be deemed to vest in Parent any direct or indirect ownership
or incidence of ownership of or with respect to any Shares. Except as provided in this Agreement, all rights, ownership and economic benefits relating to the Shares shall remain vested in and belong to the Stockholder.
11.
Further Assurances
. Subject to the terms and conditions of this Agreement, upon request of Parent, the Stockholder shall use
commercially reasonable efforts to take, or cause to be taken, all actions, and to do, or cause to be done, all things necessary to fulfill such Stockholders obligations under this Agreement.
12.
Stop Transfer Instructions
. At all times commencing with the execution and delivery of this Agreement and continuing until the
Expiration Date, in furtherance of this Agreement, the Stockholder hereby authorizes the Company or its counsel to notify the Companys transfer agent that there is a stop transfer order with respect to all of the Shares of the Stockholder (and
that this Agreement places limits on the voting and transfer of such Shares).
13.
Termination
. This Agreement and the
Proxy, and all rights and obligations of the parties hereunder and thereunder, shall terminate and shall have no further force or effect as of the Expiration Date. Notwithstanding the foregoing, nothing set forth in this
Section 13
or
elsewhere in this Agreement shall relieve either party hereto from liability, or otherwise limit the liability of either party hereto, for any intentional breach of this Agreement prior to such termination. This
Section 13
and
Sections 1
,
5
, and
14
(as applicable) shall survive any termination of this Agreement.
C-5
14.
Miscellaneous
.
(a)
Validity
. The invalidity or unenforceability of any provision of this Agreement shall not affect the
validity or enforceability of the other provisions of this Agreement, which will remain in full force and effect. In the event any Governmental Entity of competent jurisdiction holds any provision of this Agreement to be null, void or unenforceable,
the parties hereto shall negotiate in good faith and execute and deliver an amendment to this Agreement in order, as nearly as possible, to effectuate, to the extent permitted by law, the original intent of the parties hereto with respect to such
provision.
(b)
Binding Effect and Assignment
. This Agreement and all of the provisions hereof
shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns, but neither this Agreement nor any of the rights, interests or obligations of the parties hereto may be assigned by either of
the parties (whether by operation of law or otherwise) without prior written consent of the other.
(c)
Amendments; Waiver
. This Agreement may be amended by the parties hereto, and the terms and conditions hereof may be waived, only by an instrument in writing signed on behalf of each of the parties hereto, or, in the case of a waiver,
by an instrument signed on behalf of the party waiving compliance.
(d)
Specific Performance; Injunctive
Relief
. The parties hereto acknowledge that Parent shall be irreparably harmed and that there shall be no adequate remedy at law for a violation of any of the covenants or agreements of the Stockholder set forth herein. Therefore, it is
agreed that, in addition to any other remedies that may be available to Parent upon any such violation, Parent shall have the right to enforce such covenants and agreements by specific performance, injunctive relief or by any other means available
to Parent at law or in equity.
(e)
Notices
. Any notice, request, instruction or other
communication under this Agreement shall be in writing and delivered by hand or international courier service, by facsimile (with written confirmation of transmission) or by electronic mail, with a copy thereof delivered or sent as provided below:
If to Parent:
CSR plc
Churchill House
Cambridge Business Park
Cowley Road
Cambridge CB4 0WZ
United Kingdom
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Facsimile:
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+44 (0) 1223 692005
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Attention:
|
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Will Gardiner, Chief Financial Officer; and
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Adam Dolinko, Senior Vice President and General Counsel
|
E-mail:
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will.gardiner@csr.com; and
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Adam.Dolinko@csr.com
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with a copy to:
Wilson Sonsini Goodrich & Rosati
Professional Corporation
650 Page Mill Road
Palo Alto, California 94304-1050
Attention: David J. Segre
Telephone No.: (650) 493-9300
Telecopy No.:
(650) 493-6811
C-6
If to the Stockholder:
c/o Zoran Corporation
1390 Kifer Road
Sunnyvale, California 94086
United States of America
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Facsimile:
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+1 408 523 6501
|
Attention:
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General Counsel
|
Email:
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chris.denten@zoran.com
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with a copy to:
Jones Day
1755 Embarcadero Road
Palo Alto, California 94303
Facsimile: +1 650 739 3900
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Attention:
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Daniel R. Mitz
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Christopher J. Hewitt
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Timothy Curry
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E-mail:
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drmitz@jonesday.com
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cjhewitt@jonesday.com
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tcurry@jonesday.com
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(f)
No Waiver
.
The failure of either party hereto to exercise any right,
power or remedy provided under this Agreement or otherwise available in respect of this Agreement at law or in equity, or to insist upon compliance by any other party with its obligation under this Agreement, and any custom or practice of the
parties at variance with the terms of this Agreement, shall not constitute a waiver by such party of such partys right to exercise any such or other right, power or remedy or to demand such compliance.
(g)
No Third Party Beneficiaries
.
This Agreement is not intended to confer and does not confer upon any
person other than the parties hereto any rights or remedies hereunder.
(h)
Governing Law
.
This
Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, regardless of the laws that might otherwise govern under applicable principles of conflicts of law thereof.
(i)
Submission to Jurisdiction
. Each of the parties hereto hereby irrevocably and unconditionally submits,
for itself and its property, to the exclusive jurisdiction of the Delaware Court of Chancery (and if jurisdiction in the Delaware Court of Chancery shall be unavailable, the Federal courts of the United States of America of the District of
Delaware), and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or the agreements delivered in connection herewith or the transactions contemplated hereby or thereby, and each of the
parties hereby irrevocably and unconditionally (i) agrees not to commence any such action or proceeding except in Delaware Court of Chancery (and if jurisdiction in the Delaware Court of Chancery shall be unavailable, the Federal courts of the
United States of America of the District of Delaware), (ii) agrees that any claim in respect of any such action or proceeding may be heard and determined in Delaware Court of Chancery (and if jurisdiction in the Delaware Court of Chancery shall
be unavailable, the Federal courts of the United States of America of the District of Delaware), and any appellate court from any thereof, (iii) waives, to the fullest extent it may legally and effectively do so, any objection which it may now
or hereafter have to the laying of venue of any such action or proceeding in the Delaware Court of Chancery (and if jurisdiction in the Delaware Court of Chancery shall be unavailable, the Federal courts of the United States of America of the
District of Delaware), and (iv) waives, to the fullest extent it may legally and effectively do so, the defense of an inconvenient forum to the maintenance of such action or proceeding in Delaware Court of Chancery (and if jurisdiction in the
Delaware Court of Chancery shall be unavailable, the Federal courts of the United States
C-7
of America sitting in the State of Delaware). Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by Law. Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 14(e). Nothing in this Agreement will affect the
right of any party to this Agreement to serve process in any other manner permitted by Law.
(j)
Rules of
Construction
. The parties hereto hereby waive the application of any law, regulation, holding or rule of construction providing that ambiguities in an agreement or other document will be construed against the party drafting such agreement
or document.
(k)
Entire Agreement
. This Agreement and the Proxy contain the entire understanding
of the parties hereto in respect of the subject matter hereof, and supersede all prior negotiations, agreements and understandings, both written and oral, between the parties hereto with respect to the subject matter hereof, including that certain
Voting Agreement between Stockholder and Parent dated as of February 20, 2011.
(l)
Interpretation
.
(i) Whenever the words include, includes or including are used in this
Agreement they shall be deemed to be followed by the words without limitation.
(ii) The article
and section headings contained in this Agreement are solely for the purpose of reference, are not part of the agreement of the parties hereto and shall not in any way affect or be deemed to affect the meaning or interpretation of this Agreement.
(m)
Expenses
. All fees, costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such fees, costs and expenses.
(n)
Counterparts
. This Agreement may be executed in several counterparts, each of which shall be an original, but all of which together shall constitute one and the same agreement. This Agreement shall become effective when each party to
this Agreement has received counterparts signed by the other party.
(o)
No Obligation to Exercise Options
or Warrants
. Notwithstanding any provision of this Agreement to the contrary, nothing in this Agreement shall obligate the Stockholder to exercise any Company Stock Option, warrant or other right to acquire any shares of Company Common
Stock.
[
Remainder of Page Intentionally Left Blank
]
C-8
IN WITNESS WHEREOF, the undersigned have executed and caused to be effective this Agreement
as of the date first above written.
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CSR PLC
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STOCKHOLDER
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By:
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By:
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Name:
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Name:
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Title:
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Shares beneficially owned as of the date hereof:
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_____ shares of Company Common Stock
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_____ shares of Company Common Stock issuable upon exercise of outstanding options
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**** VOTING AGREEMENT ****
C-9
EXHIBIT A
IRREVOCABLE PROXY
The undersigned Stockholder (the
Stockholder
) of Zoran Corporation, a Delaware corporation (the
Company
), hereby irrevocably (to the fullest extent permitted by law)
appoints CSR plc, a corporation organized under the laws of the United Kingdom (
Parent
), acting through any of its Chief Executive Officer, Chief Financial Officer or General Counsel, as the sole and exclusive attorneys and
proxies of the undersigned, with full power of substitution and resubstitution, to vote and exercise all voting and related rights (to the full extent that the undersigned is entitled to do so) with respect to all of the shares of capital stock of
the Company that now are or hereafter may be beneficially owned by the undersigned, and any and all other shares or equity securities of the Company issued or issuable in respect thereof on or after the date hereof (collectively, the
Shares
) in accordance with the terms of this Irrevocable Proxy until the Expiration Date (as defined below);
provided
,
however
, that such proxy and voting and related rights are expressly limited to the matters
discussed in clauses (i) through (iii) in the fourth paragraph of this Irrevocable Proxy. Upon the undersigneds execution of this Irrevocable Proxy, any and all prior proxies given by the undersigned with respect to any Shares are
hereby revoked and the undersigned agrees not to grant any subsequent proxies with respect to the Shares until after the Expiration Date.
This Irrevocable Proxy is irrevocable to the fullest extent permitted by law, is coupled with an interest and is granted pursuant to that certain Voting Agreement of even date herewith by and between
Parent and the undersigned Stockholder (the
Voting Agreement
), and is granted as a condition and inducement to the willingness of Parent, Zeiss Merger Sub, Inc., a Delaware corporation and wholly-owned subsidiary of Parent
(
Merger Sub
) to enter into that certain Amended and Restated Agreement and Plan of Merger of even date herewith (as it may be amended from time to time, the
Amended Merger Agreement
), among Parent, Merger Sub
and the Company. The Amended Merger Agreement provides for, among other things, the merger of Merger Sub with and into the Company (the
Merger
) with the Company continuing as the surviving corporation of the Merger and pursuant to
which all outstanding shares of capital stock of the Company will be converted into the right to receive the consideration set forth in the Amended Merger Agreement (the
Merger Consideration
).
As used herein, the term
Expiration Date
shall mean the earliest to occur of (i) such date and time as the
Amended Merger Agreement shall have been validly terminated pursuant to Article VII thereof, (ii) such date and time as the Merger shall become effective in accordance with the terms and provisions of the Amended Merger Agreement,
(iii) such date and time as the Amended Merger Agreement shall have been validly amended to provide for a decrease in the Merger Consideration and (iv) such date and time as (x) the Company Board Recommendation or the Parent Board
Recommendation shall have been withdrawn, modified, qualified or amended, in each case in accordance with the provisions of Section 5.4 of the Amended Merger Agreement, or (y) Parent or the Company, as the case may be, shall have
recommended a Takeover Proposal with respect to such party, in each case in accordance with the provisions of Section 5.4 of the Amended Merger Agreement.
The attorneys and proxies named above, and each of them, are hereby authorized and empowered by the undersigned, at any time prior to the Expiration Date, to act as the undersigneds attorney and
proxy to vote the Shares, and to exercise all voting, consent and similar rights of the undersigned with respect to the Shares (including, without limitation, the power to execute and deliver written consents) at every annual, special, adjourned or
postponed meeting of stockholders of the Company and in every written consent in lieu of such meeting:
(i) in favor of the
adoption of the Amended Merger Agreement, and in favor of each of the other actions contemplated by the Amended Merger Agreement and any action required in furtherance thereof;
(ii) against approval of any proposal made in opposition to, in competition with, or would result in a breach of, the Amended Merger
Agreement or the Merger or any other transactions contemplated by the Amended Merger Agreement; and
C-10
(iii) against any of the following actions (other than those actions that relate to the
Merger and any other transactions contemplated by the Amended Merger Agreement): (A) any merger, consolidation, business combination, sale of assets, reorganization or recapitalization of or involving the Company or any of its Subsidiaries,
(B) any sale, lease or transfer of all or substantially all of the assets of the Company or any of its Subsidiaries, (C) any reorganization, recapitalization, dissolution, liquidation or winding up of the Company or any of its
Subsidiaries, (D) any material change in the capitalization of the Company or any of its Subsidiaries, or the corporate structure of the Company or any of its Subsidiaries, (E) any Takeover Proposal with respect to the Company or
(F) any other action that is intended, or would reasonably be expected to, materially impede, interfere with, delay, postpone, discourage or adversely affect the Merger or any other transactions contemplated by the Amended Merger Agreement.
The attorneys and proxies named above may not exercise this Irrevocable Proxy on any other matter. The undersigned
Stockholder may vote the Shares in its sole discretion on all other matters.
Any obligation of the undersigned hereunder
shall be binding upon the successors and permitted assigns of the undersigned.
This Irrevocable Proxy shall terminate, and be
of no further force and effect, automatically upon the Expiration Date.
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Dated: June __, 2011
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STOCKHOLDER
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By:
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Name:
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***** IRREVOCABLE PROXY ****
C-11
APPENDIX DFORM OF CSR VOTING AGREEMENT
D-1
THIS AGREEMENT is made June
, 2011
BETWEEN:
1.
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Zoran Corporation, a company incorporated under the laws of Delaware with I.R.S. Employer Identification number 94-2794449 and whose registered office is at 1390 Kifer
Road, Sunnyvale, California 94086, United States of America (the
Company
); and
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2.
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[NAME OF CROMARTY DIRECTOR] (the
Shareholder
), a director of CSR plc, a company incorporated under the laws of England and Wales with registered
number 04187346 and whose registered office is at Churchill House, Cambridge Business Park, Cowley Road, Cambridge CB4 0WZ, United Kingdom (the
Parent
).
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WHEREAS:
(A)
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The Parent, Zeiss Merger Sub, Inc., a Delaware corporation and wholly-owned subsidiary of the Parent (
Merger Sub
), and the Company have entered into
an Amended and Restated Agreement and Plan of Merger of even date herewith (as it may be amended from time to time, the
Amended Merger Agreement
), which provides for, among other things, the merger of Merger Sub with and into the
Company (the
Merger
) with the Company continuing as the surviving corporation of the Merger and pursuant to which all outstanding shares of capital stock of the Company will be converted into the right to receive the consideration
set forth in the Amended Merger Agreement (the
Merger Consideration
).
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(B)
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The Amended Merger Agreement and the completion of the Merger are conditional upon the Company and the Parent obtaining the necessary approval from their respective
shareholders in accordance with the laws of Delaware and England and Wales.
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(C)
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The Shareholder is the beneficial owner of (or is otherwise able to control the exercise of all rights attaching to) the number of ordinary shares in the capital of the
Parent as set out on the signature page of this Agreement.
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(D)
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The Shareholder has agreed to enter into this Agreement in consideration for the Company entering into the Amended Merger Agreement.
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WHEREBY IT IS AGREED as follows:
1.
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Definitions and Interpretation
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Business Day
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shall mean a day (other than a Saturday or a Sunday) on which banks are open for business (other than solely for trading and settlement in euro) in London;
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Encumbrances
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shall mean all liens, equities, charges, encumbrances, options, rights of pre-emption and any other third party rights and interests of any nature;
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Expiration Date
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shall mean the earliest to occur of (i) such date and time as the Amended Merger Agreement shall have been validly terminated pursuant to Article VII thereof, (ii) such date and
time as the Merger shall become effective in accordance with the terms and provisions of the Amended Merger Agreement and (iii) such date and time as (x) the Company Board Recommendation or the Parent Board Recommendation shall have been validly
withdrawn, modified, qualified or amended, in each case in accordance with the provisions of Section 5.4 of the Amended Merger Agreement or (y) the Parent or the Company, as the case may be, shall have recommended a Takeover Proposal with respect to
such party, in each case in accordance with the provisions of Section 5.4 of the Amended Merger Agreement;
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D-2
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the
Resolution
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shall mean any resolution (whether or not amended and whether put on a show of hands or a poll or by way of written resolution) which is proposed at any general meeting of the
Parent (including any adjournment thereof) in relation to the adoption of the Amended Merger Agreement, the Merger or any other actions contemplated by the Amended Merger Agreement;
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Share Option
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shall mean any share option granted to the Shareholder by the Parent (i) as at the date of this Agreement or (ii) during the period from the date of this Agreement to the Expiration
Date, including but not limited to the Founders Share Option Plan, the Global Share Option Plan, the Cromarty plc Share Option Plan and the Cromarty Share Award Plan;
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Shares
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shall mean (i) all equity securities of the Parent (including all ordinary shares in the capital of the Parent, all preference shares in the capital of the Parent and all Share
Options and other rights to acquire shares of the ordinary shares in the capital of the Parent) owned by the Shareholder as at the date of this Agreement and (ii) all additional equity securities of the Parent (including all additional ordinary
shares in the capital of the Parent, all additional preference shares in the capital of the Parent and all additional Share Options, warrants and other rights to acquire ordinary shares in the capital of the Parent) of which the Shareholder acquires
ownership during the period from the date of this Agreement to the Expiration Date (including by way of stock dividend or distribution, split-up, recapitalization, combination, exchange of shares and the like); and
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Transfer
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shall mean:
(A) the sale, transfer, charge, encumbrance, grant of any option over or otherwise disposal of
all or any of the Shares or interest in the Shares, or
(B) entering into any agreement or arrangement or permitting any agreement or arrangement to be entered into or incurring any obligation or permitting any obligation to arise in relation
to all or any of the Shares or interest in the Shares.
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1.2
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All capitalised terms that are used but not defined herein shall have the respective meanings ascribed to them in the Amended Merger Agreement.
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1.3
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In this Agreement, unless otherwise specified:
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(A)
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references to clauses, sub-clauses, paragraphs and sub-paragraphs are to clauses, sub-clauses, paragraphs and sub-paragraphs of this Agreement;
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(B)
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a reference to any statute or statutory provision shall be construed as a reference to the same as it may have been, or may from time to time be, amended, modified or
re-enacted;
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(C)
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references to a
person
shall be construed so as to include any individual, firm, company, government, state or agency of a state, local or municipal
authority or government body or any joint venture, association or partnership (whether or not having separate legal personality); and
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(D)
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headings to clauses are for convenience only and do not affect the interpretation of this Agreement.
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2.1
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Subject to clause 2.2, the Shareholder shall not Transfer (or cause or permit the Transfer of) any of the Shares, or enter into any agreement relating thereto.
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D-3
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(A)
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sell any Shares owned by the Shareholder as at the date of this Agreement to pay the exercise price upon the exercise of a Share Option or to satisfy the
Shareholders tax withholding obligation upon the exercise of a Share Option, in each case as permitted by any share option plan,
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(B)
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Transfer any Shares to affiliates, immediate family members, any trust established for the benefit of the Shareholder and/or for the benefit of one or more members of
the Shareholders immediate family, charitable organisations or upon the death of the Shareholder,
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provided
that the recipient of such Shares agrees to be bound by this Agreement, or
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(C)
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Transfer any Shares with the Companys prior written consent.
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2.3
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The Shareholder shall not enter into any agreement or arrangement or permit any agreement or arrangement to be entered into or incur any obligation or permit any
obligation to arise which would or might restrict or impede the Merger or otherwise preclude him from complying with his obligations under clause 3.
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3.
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Agreement to Vote Shares
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3.1
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The Shareholder shall exercise or, where applicable, procure the exercise of, all voting rights attaching to the Shares on any resolution (whether or not amended and
whether put on a show of hands or a poll) which is proposed at any general meeting of the Parent (including any adjournment thereof) to vote:
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(A)
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in favour of the Resolution;
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(B)
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against any proposal made in opposition to or in competition with the Resolution, or which would result in a breach of, the Amended Merger Agreement or the Merger or
any other transactions contemplated by the Amended Merger Agreement; and
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(C)
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against any of the following actions (other than those actions that relate to the Merger and any other transactions contemplated by the Amended Merger Agreement):
(A) any merger, consolidation, business combination, sale of assets, reorganization or recapitalization of or involving the Parent or any of its Subsidiaries, (B) any sale, lease or transfer of all or substantially all of the assets of the
Parent or any of its Subsidiaries, (C) any reorganization, recapitalization, dissolution, liquidation or winding up of the Parent or any of its Subsidiaries, (D) any material change in the capitalization of the Parent or any of its
Subsidiaries, or the corporate structure of the Parent or any of its Subsidiaries, (E) any Takeover Proposal with respect to the Parent, or (F) any other action that is intended, or would reasonably be expected to, materially impede,
interfere with, delay, postpone, discourage or adversely affect the Merger or any other transactions contemplated by the Amended Merger Agreement.
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3.2
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The Shareholder shall retain at all times the right to vote its Shares in its sole discretion and without any other limitation on those matters other than those set
forth in clause 3.1 that are at any time or from time to time presented for consideration to the Parents shareholders generally.
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3.3
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In the event that a meeting of the shareholders of the Parent is held, the Shareholder shall, or shall cause the holder of record of the Shares on any applicable record
date to, appear at such meeting or otherwise cause the Shares to be counted as present thereat for purposes of establishing a quorum.
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4.
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Directors and Officers
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4.1
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The parties hereto acknowledge and agree that the Shareholders obligations hereunder are solely in his capacity as a shareholder of the Parent, and that none of
the provisions herein set forth shall be deemed to restrict or limit any fiduciary or other duty the Shareholder may have as a member of the board of directors of the Parent, as an executive officer of the Parent, or as a trustee of any trust, or as
a director or officer of any other entity, including with respect to Section 5.4 of the Amended Merger Agreement.
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D-4
4.2
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The Company acknowledges and agrees that no provision of this Agreement shall limit or otherwise restrict the Shareholder with respect to any act or omission that he
may undertake or authorise in his capacity as a director or officer of any other entity including without limitation any vote that the Shareholder may make as a director or officer of the Parent with respect to any matter presented to the board of
directors of the Parent or any vote that the Shareholder may make as a trustee of any trust or as a director or officer of any entity other than the Parent, including with respect to Section 5.4 of the Amended Merger Agreement.
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5.
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Representations and Warranties of the Shareholder
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The Shareholder hereby represents and warrants to the Company as follows:
5.1
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Power and Binding Agreement
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The
Shareholder has full power and authority and the right (free from any legal or other restrictions), and will at all times continue to have all relevant power and authority and the right, to enter into and perform his obligations under this Agreement
in accordance with its terms. This Agreement has been duly executed and delivered by the Shareholder and, assuming this Agreement constitutes a valid and binding obligation of the Company and the Merger Subs, constitutes a valid and binding
obligation of the Shareholder, enforceable against the Shareholder in accordance with its terms, except that such enforceability may be limited by applicable bankruptcy, insolvency, reorganisation, moratorium and other similar laws affecting or
relating to creditors rights generally and is subject to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or law).
None of the
execution and delivery by the Shareholder of this Agreement, the performance by the Shareholder of its obligations hereunder or the consummation by the Shareholder of the transactions contemplated hereby will (i) result in a violation or breach
of any agreement to which the Shareholder is a party or by which the Shareholder may be bound, including any voting agreement or voting trust, except for violations, breaches or defaults that would not in any material respect impair or adversely
effect the ability of the Shareholder to perform its obligations under this Agreement, or (ii) violate any order, writ, injunction, decree, judgment, order, statute, rule, or regulation applicable to the Shareholder.
The
Shareholder is the sole beneficial owner of (or is otherwise able to control the exercise of all rights attaching to, including voting rights and the ability to procure the transfer of) and the registered holder of the number of ordinary shares in
the capital of the Parent set forth on the signature page of this Agreement, all of which are free from any Encumbrances. Except as set forth on the signature page to this Agreement, the Shareholder does not own, beneficially or otherwise, any
shares or securities of the Parent other than those set forth on the signature page of this Agreement.
The Shareholder
has or will have sole voting power with respect to all of the Shares, with no limitations, qualifications or restrictions on such rights, subject to the terms of this Agreement and the general law.
5.5
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Reliance by the Company
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The
Shareholder understands and acknowledges that the Company is entering into the Amended Merger Agreement in reliance upon the Shareholders execution and delivery of this Agreement.
The
Shareholder shall not, directly or indirectly, take any voluntary action that would make any representation or warranty of the Shareholder contained herein untrue or incorrect in any material respect.
D-5
The
Shareholder shall permit the Company to publish and disclose in all documents filed with the UK Listing Authority, the London Stock Exchange and the Panel on Takeovers and Mergers, and any press release or other disclosure document that the Company
reasonably determines to be necessary or desirable in connection with the Merger and any transactions related to the Merger, the Shareholders identity and ownership of Shares and the nature of the Shareholders commitments, arrangements
and understandings under this Agreement.
Nothing contained in this Agreement shall be deemed to vest in the Company any direct or indirect ownership or incidence of ownership of
or with respect to any securities of the Parent held by the Shareholder. All rights, ownership and economic benefits of and relating to such securities shall remain vested in and belong to the Shareholder and the Company shall have no authority to
manage, direct, superintend, restrict, regulate, govern or administer any the policies or operations of the Parent or exercise any power or authority to direct any of the Shareholder in the voting of any securities except as specifically provided
here.
The
Shareholder shall at his own cost, from time to time upon the Companys request, do or procure the doing of all acts and/or execute or procure the execution of all documents in a form satisfactory to the Company which the Company may reasonably
consider necessary for giving full effect to this Agreement and securing to the Company the full benefit of the rights, powers and remedies conferred upon the Company in this Agreement.
This
Agreement, and all rights and obligations of the parties hereunder, shall terminate and shall have no further force or effect as of the Expiration Date. Notwithstanding the foregoing, nothing set forth in this clause or elsewhere in this Agreement
shall relieve either party hereto from liability, or otherwise limit the liability of either party hereto, for any intentional breach of this Agreement prior to such termination. This clause 10 and clauses 1, 4 and 11 (as applicable) shall survive
any termination of this Agreement.
The invalidity or
unenforceability of any provision of this Agreement shall not affect the validity or enforceability of the other provisions of this Agreement, which will remain in full force and effect. In the event any governmental entity of competent jurisdiction
holds any provision of this Agreement to be null, void or unenforceable, the parties hereto shall negotiate in good faith and execute and deliver an amendment to this Agreement in order, as nearly as possible, to effectuate, to the extent permitted
by law, the original intent of the parties hereto with respect to such provision.
This Agreement and
all of the provisions hereof shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns, but neither party shall assign all or any part of the benefit of, or its rights or benefits
under, this Agreement without the prior written consent of the other.
D-6
This Agreement may
be amended by the parties hereto, and the terms and conditions hereof may be waived, only by an instrument in writing signed on behalf of each of the parties hereto, or, in the case of a waiver, by an instrument signed on behalf of the party waiving
compliance.
11.4
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Specific Performance; Injunctive Relief.
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The parties hereto acknowledge that the Company shall be irreparably harmed and that there shall be no adequate remedy at law for a violation of any of the covenants or agreements of the Shareholder set
forth herein. Therefore, it is agreed that, in addition to any other remedies that may be available to the Company upon any such violation, the Company shall have the right to enforce such covenants and agreements by specific performance, injunctive
relief or by any other means available to the Company at law or in equity.
Any notice, request,
instruction or other communication pursuant to this Agreement shall be in writing and delivered by hand or international courier service, by facsimile (with written confirmation of transmission) or by electronic mail with a copy thereof delivered or
sent as provided below:
If to the Company:
1390 Kifer Road
Sunnyvale, California 94086
United States of America
Attention: [
]
Telephone No.:
[
]
Telecopy No.: [(__)
-
]
with a copy to: Jones Day
[
]
Attention: [
]
Telephone No.: [
]
Telecopy No.: [
]
If to the Shareholder:
c/o CSR plc
Churchill House
Cambridge Business Park
Cowley Road
Cambridge CB4 0WZ
United Kingdom
Attention: [
]
Telephone No.: [
]
D-7
Telecopy No.: [
]
with a copy to:
Wilson Sonsini Goodrich & Rosati
Professional Corporation
650 Page Mill Road
Palo Alto, California 94304-1050
Attention: David J. Segre
Telephone No.: (650) 493-9300
Telecopy No.: (650) 493-6811
and a copy to:
Slaughter and May
One Bunhill Row
London EC1Y 8YY
United Kingdom
Attention: William Underhill
Telephone No.: (44) 020 7090 3060
Each such communication given under this
Agreement shall, in the absence of earlier receipt, be deemed to have been duly given as follows:
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(A)
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if delivered personally, on delivery;
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(B)
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if sent by first class inland post, two clear Business Days after the date of posting;
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(C)
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if sent by airmail, six clear Business Days after the date of posting; and
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(D)
|
if sent by facsimile or e-mail, when sent.
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The failure of either
party hereto to exercise any right, power or remedy provided under this Agreement or otherwise available in respect of this Agreement at law or in equity, or to insist upon compliance by any other party with its obligation under this Agreement, and
any custom or practice of the parties at variance with the terms of this Agreement, shall not constitute a waiver by such party of such partys right to exercise any such or other right, power or remedy or to demand such compliance.
The parties
to this Agreement do not intend that any term of this Agreement should be enforceable, by virtue of the Contracts (Rights of Third Parties) Act 1999, by any person who is not a party to this Agreement.
This Agreement
shall be governed by and construed in accordance with English law. Any matter, claim or dispute arising out of or in connection with this Agreement, whether contractual or non-contractual, is to be governed by and determined in accordance with
English law.
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The parties
irrevocably submit to and agree that the courts of England and Wales shall have exclusive jurisdiction to settle any dispute or claim that arises out of or in connection with this Agreement and its subject matter or formation (including
non-contractual disputes or claims).
This Agreement
sets forth the entire agreement and understanding between the parties hereto in respect of the subject matter hereof, and supersede all prior negotiations, agreements and understandings, both written and oral, between the parties hereto with respect
to the subject matter hereof, including that certain Agreement between the Company and the Shareholder dated as of February 20, 2011.
All fees, costs and
expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such fees, costs and expenses.
This Agreement may
be executed in any number of counterparts, and by parties on separate counterparts, but shall not be effective until each party has executed at least one counterpart. Each counterpart shall constitute an original of this Agreement, but all the
counterparts shall together constitute but one and the same instrument. This Agreement shall become effective when each party to this Agreement has received counterparts signed by the other party.
11.13
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No Obligation to Exercise Options or Warrants
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Notwithstanding any provision of this Agreement to the contrary, nothing in this Agreement shall obligate the Shareholder to exercise any Share Options, warrant or other right to acquire any ordinary
shares in the capital of the Parent.
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IN WITNESS
of which this Agreement has been executed on the date which first appears above.
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Signed by [the Shareholder]
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Executed by Zoran Corporation
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Shares beneficially owned by the Shareholder as of the date hereof:
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Number of
ordinary shares
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Number of
preferred/other
shares
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Registered owner
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Beneficial owner
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D-10
APPENDIX ESECTION 262 OF THE DELAWARE GENERAL
CORPORATION LAW
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Section 262 of the Delaware General Corporation Law
§ 262. Appraisal rights
(a) Any stockholder of a corporation of this State who holds shares of stock on the date of the making of a demand pursuant to subsection
(d) of this section with respect to such shares, who continuously holds such shares through the effective date of the merger or consolidation, who has otherwise complied with subsection (d) of this section and who has neither voted in favor of the
merger or consolidation nor consented thereto in writing pursuant to § 228 of this title shall be entitled to an appraisal by the Court of Chancery of the fair value of the stockholders shares of stock under the circumstances described in
subsections (b) and (c) of this section. As used in this section, the word stockholder means a holder of record of stock in a corporation; the words stock and share mean and include what is ordinarily meant by
those words; and the words depository receipt mean a receipt or other instrument issued by a depository representing an interest in 1 or more shares, or fractions thereof, solely of stock of a corporation, which stock is deposited with
the depository.
(b) Appraisal rights shall be available for the shares of any class or series of stock of a constituent
corporation in a merger or consolidation to be effected pursuant to § 251 (other than a merger effected pursuant to § 251(g) of this title), § 252, § 254, § 255, § 256, § 257, § 258, § 263 or § 264
of this title:
(1) Provided, however, that no appraisal rights under this section shall be available for the shares of any
class or series of stock, which stock, or depository receipts in respect thereof, at the record date fixed to determine the stockholders entitled to receive notice of the meeting of stockholders to act upon the agreement of merger or consolidation,
were either (i) listed on a national securities exchange or (ii) held of record by more than 2,000 holders; and further provided that no appraisal rights shall be available for any shares of stock of the constituent corporation surviving a merger if
the merger did not require for its approval the vote of the stockholders of the surviving corporation as provided in § 251(f) of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights under this section shall be available for the shares of any class or series of stock of a constituent corporation if the holders
thereof are required by the terms of an agreement of merger or consolidation pursuant to §§ 251, 252, 254, 255, 256, 257, 258, 263 and 264 of this title to accept for such stock anything except:
a. Shares of stock of the corporation surviving or resulting from such merger or consolidation, or depository receipts in respect
thereof;
b. Shares of stock of any other corporation, or depository receipts in respect thereof, which shares of stock (or
depository receipts in respect thereof) or depository receipts at the effective date of the merger or consolidation will be either listed on a national securities exchange or held of record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
d. Any combination of the shares of stock, depository receipts and cash in lieu of fractional shares or
fractional depository receipts described in the foregoing subparagraphs a., b. and c. of this paragraph.
(3) In the event
all of the stock of a subsidiary Delaware corporation party to a merger effected under § 253 or § 267 of this title is not owned by the parent immediately prior to the merger, appraisal rights shall be available for the shares of the
subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that appraisal rights
under this section shall be available for the shares of any class or series of its stock as a result of an amendment to its certificate of incorporation, any merger or consolidation in which the corporation is a constituent corporation or the sale
of all or substantially all of the assets of the corporation. If the certificate of incorporation contains such a provision, the procedures of this section, including those set forth in subsections (d) and (e) of this section, shall apply as nearly
as is practicable.
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(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights are provided under this section is to be submitted for approval at
a meeting of stockholders, the corporation, not less than 20 days prior to the meeting, shall notify each of its stockholders who was such on the record date for notice of such meeting (or such members who received notice in accordance with §
255(c) of this title) with respect to shares for which appraisal rights are available pursuant to subsection (b) or (c) of this section that appraisal rights are available for any or all of the shares of the constituent corporations, and shall
include in such notice a copy of this section and, if 1 of the constituent corporations is a nonstock corporation, a copy of § 114 of this title. Each stockholder electing to demand the appraisal of such stockholders shares shall deliver
to the corporation, before the taking of the vote on the merger or consolidation, a written demand for appraisal of such stockholders shares. Such demand will be sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the appraisal of such stockholders shares. A proxy or vote against the merger or consolidation shall not constitute such a demand. A stockholder electing to take such action must
do so by a separate written demand as herein provided. Within 10 days after the effective date of such merger or consolidation, the surviving or resulting corporation shall notify each stockholder of each constituent corporation who has complied
with this subsection and has not voted in favor of or consented to the merger or consolidation of the date that the merger or consolidation has become effective; or
(2) If the merger or consolidation was approved pursuant to § 228, § 253, or § 267 of this title, then either a constituent corporation before the effective date of the merger or
consolidation or the surviving or resulting corporation within 10 days thereafter shall notify each of the holders of any class or series of stock of such constituent corporation who are entitled to appraisal rights of the approval of the merger or
consolidation and that appraisal rights are available for any or all shares of such class or series of stock of such constituent corporation, and shall include in such notice a copy of this section and, if 1 of the constituent corporations is a
nonstock corporation, a copy of § 114 of this title. Such notice may, and, if given on or after the effective date of the merger or consolidation, shall, also notify such stockholders of the effective date of the merger or consolidation. Any
stockholder entitled to appraisal rights may, within 20 days after the date of mailing of such notice, demand in writing from the surviving or resulting corporation the appraisal of such holders shares. Such demand will be sufficient if it
reasonably informs the corporation of the identity of the stockholder and that the stockholder intends thereby to demand the appraisal of such holders shares. If such notice did not notify stockholders of the effective date of the merger or
consolidation, either (i) each such constituent corporation shall send a second notice before the effective date of the merger or consolidation notifying each of the holders of any class or series of stock of such constituent corporation that are
entitled to appraisal rights of the effective date of the merger or consolidation or (ii) the surviving or resulting corporation shall send such a second notice to all such holders on or within 10 days after such effective date; provided, however,
that if such second notice is sent more than 20 days following the sending of the first notice, such second notice need only be sent to each stockholder who is entitled to appraisal rights and who has demanded appraisal of such holders shares
in accordance with this subsection. An affidavit of the secretary or assistant secretary or of the transfer agent of the corporation that is required to give either notice that such notice has been given shall, in the absence of fraud, be prima
facie evidence of the facts stated therein. For purposes of determining the stockholders entitled to receive either notice, each constituent corporation may fix, in advance, a record date that shall be not more than 10 days prior to the date the
notice is given, provided, that if the notice is given on or after the effective date of the merger or consolidation, the record date shall be such effective date. If no record date is fixed and the notice is given prior to the effective date, the
record date shall be the close of business on the day next preceding the day on which the notice is given.
(e) Within 120
days after the effective date of the merger or consolidation, the surviving or resulting corporation or any stockholder who has complied with subsections (a) and (d) of this section hereof and who is otherwise entitled to appraisal rights, may
commence an appraisal proceeding by filing a petition in the Court of Chancery demanding a determination of the value of the stock of all such stockholders. Notwithstanding the foregoing, at any time within 60 days after the effective date of the
merger or consolidation, any stockholder who
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has not commenced an appraisal proceeding or joined that proceeding as a named party shall have the right to withdraw such stockholders demand for appraisal and to accept the terms offered
upon the merger or consolidation. Within 120 days after the effective date of the merger or consolidation, any stockholder who has complied with the requirements of subsections (a) and (d) of this section hereof, upon written request, shall be
entitled to receive from the corporation surviving the merger or resulting from the consolidation a statement setting forth the aggregate number of shares not voted in favor of the merger or consolidation and with respect to which demands for
appraisal have been received and the aggregate number of holders of such shares. Such written statement shall be mailed to the stockholder within 10 days after such stockholders written request for such a statement is received by the surviving
or resulting corporation or within 10 days after expiration of the period for delivery of demands for appraisal under subsection (d) of this section hereof, whichever is later. Notwithstanding subsection (a) of this section, a person who is the
beneficial owner of shares of such stock held either in a voting trust or by a nominee on behalf of such person may, in such persons own name, file a petition or request from the corporation the statement described in this subsection.
(f) Upon the filing of any such petition by a stockholder, service of a copy thereof shall be made upon the surviving or
resulting corporation, which shall within 20 days after such service file in the office of the Register in Chancery in which the petition was filed a duly verified list containing the names and addresses of all stockholders who have demanded payment
for their shares and with whom agreements as to the value of their shares have not been reached by the surviving or resulting corporation. If the petition shall be filed by the surviving or resulting corporation, the petition shall be accompanied by
such a duly verified list. The Register in Chancery, if so ordered by the Court, shall give notice of the time and place fixed for the hearing of such petition by registered or certified mail to the surviving or resulting corporation and to the
stockholders shown on the list at the addresses therein stated. Such notice shall also be given by 1 or more publications at least 1 week before the day of the hearing, in a newspaper of general circulation published in the City of Wilmington,
Delaware or such publication as the Court deems advisable. The forms of the notices by mail and by publication shall be approved by the Court, and the costs thereof shall be borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the stockholders who have complied with this section and who have become
entitled to appraisal rights. The Court may require the stockholders who have demanded an appraisal for their shares and who hold stock represented by certificates to submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder fails to comply with such direction, the Court may dismiss the proceedings as to such stockholder.
(h) After the Court determines the stockholders entitled to an appraisal, the appraisal proceeding shall be conducted in accordance with the rules of the Court of Chancery, including any rules
specifically governing appraisal proceedings. Through such proceeding the Court shall determine the fair value of the shares exclusive of any element of value arising from the accomplishment or expectation of the merger or consolidation, together
with interest, if any, to be paid upon the amount determined to be the fair value. In determining such fair value, the Court shall take into account all relevant factors. Unless the Court in its discretion determines otherwise for good cause shown,
interest from the effective date of the merger through the date of payment of the judgment shall be compounded quarterly and shall accrue at 5% over the Federal Reserve discount rate (including any surcharge) as established from time to time during
the period between the effective date of the merger and the date of payment of the judgment. Upon application by the surviving or resulting corporation or by any stockholder entitled to participate in the appraisal proceeding, the Court may, in its
discretion, proceed to trial upon the appraisal prior to the final determination of the stockholders entitled to an appraisal. Any stockholder whose name appears on the list filed by the surviving or resulting corporation pursuant to subsection (f)
of this section and who has submitted such stockholders certificates of stock to the Register in Chancery, if such is required, may participate fully in all proceedings until it is finally determined that such stockholder is not entitled to
appraisal rights under this section.
(i) The Court shall direct the payment of the fair value of the shares, together with
interest, if any, by the surviving or resulting corporation to the stockholders entitled thereto. Payment shall be so made to each such stockholder, in the case of holders of uncertificated stock forthwith, and the case of holders of shares
represented
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by certificates upon the surrender to the corporation of the certificates representing such stock. The Courts decree may be enforced as other decrees in the Court of Chancery may be
enforced, whether such surviving or resulting corporation be a corporation of this State or of any state.
(j) The costs of
the proceeding may be determined by the Court and taxed upon the parties as the Court deems equitable in the circumstances. Upon application of a stockholder, the Court may order all or a portion of the expenses incurred by any stockholder in
connection with the appraisal proceeding, including, without limitation, reasonable attorneys fees and the fees and expenses of experts, to be charged pro rata against the value of all the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no stockholder who has demanded appraisal rights as provided in
subsection (d) of this section shall be entitled to vote such stock for any purpose or to receive payment of dividends or other distributions on the stock (except dividends or other distributions payable to stockholders of record at a date which is
prior to the effective date of the merger or consolidation); provided, however, that if no petition for an appraisal shall be filed within the time provided in subsection (e) of this section, or if such stockholder shall deliver to the surviving or
resulting corporation a written withdrawal of such stockholders demand for an appraisal and an acceptance of the merger or consolidation, either within 60 days after the effective date of the merger or consolidation as provided in subsection
(e) of this section or thereafter with the written approval of the corporation, then the right of such stockholder to an appraisal shall cease. Notwithstanding the foregoing, no appraisal proceeding in the Court of Chancery shall be dismissed as to
any stockholder without the approval of the Court, and such approval may be conditioned upon such terms as the Court deems just; provided, however that this provision shall not affect the right of any stockholder who has not commenced an appraisal
proceeding or joined that proceeding as a named party to withdraw such stockholders demand for appraisal and to accept the terms offered upon the merger or consolidation within 60 days after the effective date of the merger or consolidation,
as set forth in subsection (e) of this section.
(l) The shares of the surviving or resulting corporation to which the shares
of such objecting stockholders would have been converted had they assented to the merger or consolidation shall have the status of authorized and unissued shares of the surviving or resulting corporation.
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