Document:

exv4wxhy

 

Exhibit 4(h)

Stock Purchase Agreement
 among
 Koninklijke Philips Electronics N.V.,

 Philips Semiconductors International B.V.

 and

 KASLION Acquisition B.V.

Execution Version

STOCK PURCHASE AGREEMENT

among

Koninklijke Philips Electronics N.V.,

Philips Semiconductors International B.V.

(currently being renamed NXP B.V.)

and

KASLION Acquisition B.V.

Dated as of September 28, 2006

 

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 
	 

	 	ARTICLE I	 	 	 	 
	 

	 	DEFINITIONS AND TERMS	 	 	 	 
	 
	 	 	 	 	 	 
	Section 1.1

	 	Certain Definitions
	 	 	2	 
	Section 1.2

	 	Other Terms
	 	 	11	 
	Section 1.3

	 	Other Definitional Provisions
	 	 	11	 
	 
	 	 	 	 	 	 
	 

	 	ARTICLE II	 	 	 	 
	 

	 	PURCHASE AND SALE	 	 	 	 
	 
	 	 	 	 	 	 
	Section 2.1

	 	Purchase and Sale of Shares
	 	 	12	 
	Section 2.2

	 	Consideration
	 	 	12	 
	Section 2.3

	 	Closing
	 	 	13	 
	Section 2.4

	 	Deliveries by Philips and the Company
	 	 	13	 
	Section 2.5

	 	Deliveries by Newco
	 	 	13	 
	Section 2.6

	 	Deferred Closing
	 	 	13	 
	Section 2.7

	 	Post-Closing Adjustment
	 	 	14	 
	 
	 	 	 	 	 	 
	 

	 	ARTICLE III	 	 	 	 
	 

	 	REPRESENTATIONS AND WARRANTIES REGARDING PHILIPS	 	 	 	 
	 
	 	 	 	 	 	 
	Section 3.1

	 	Corporate Status
	 	 	17	 
	Section 3.2

	 	Due Authorization, Execution and Delivery; Enforceability
	 	 	17	 
	Section 3.3

	 	No Conflicts
	 	 	17	 
	Section 3.4

	 	Consents
	 	 	18	 
	Section 3.5

	 	Ownership of Company Shares
	 	 	18	 
	Section 3.6

	 	Litigation and Claims
	 	 	18	 
	Section 3.7

	 	Philips Equity Commitment Letter
	 	 	18	 
	Section 3.8

	 	Finders’ Fees
	 	 	18	 
	 
	 	 	 	 	 	 
	 

	 	ARTICLE IV	 	 	 	 
	 

	 	REPRESENTATIONS AND WARRANTIES REGARDING THE COMPANY	 	 	 	 
	 
	 	 	 	 	 	 
	Section 4.1

	 	Corporate Status.
	 	 	19	 
	Section 4.2

	 	Due Authorization, Execution and Delivery; Enforceability
	 	 	19	 
	Section 4.3

	 	No Conflicts
	 	 	20	 
	Section 4.4

	 	Consents
	 	 	20	 
	Section 4.5

	 	Capitalization
	 	 	20	 
	Section 4.6

	 	Financial Statements
	 	 	21	 
	Section 4.7

	 	Events Subsequent to Financial Statements
	 	 	22	 
	Section 4.8

	 	Tax Matters
	 	 	22	 
	Section 4.9

	 	Litigation
	 	 	23	 

- i -

 

	 	 	 	 	 	 	 
	Section 4.10

	 	Compliance with Laws
	 	 	23	 
	Section 4.11

	 	Employee Benefits
	 	 	23	 
	Section 4.12

	 	Labor
	 	 	24	 
	Section 4.13

	 	Real Property
	 	 	25	 
	Section 4.14

	 	Intellectual Property
	 	 	26	 
	Section 4.15

	 	Environmental Matters
	 	 	26	 
	Section 4.16

	 	Contracts
	 	 	27	 
	Section 4.17

	 	Territorial Restrictions
	 	 	27	 
	Section 4.18

	 	Insurance
	 	 	27	 
	Section 4.19

	 	Sufficiency of Assets
	 	 	28	 
	Section 4.20

	 	Debt Financing Commitment
	 	 	28	 
	Section 4.21

	 	No Other Representations or Warranties
	 	 	28	 
	 
	 	 	 	 	 	 
	 

	 	ARTICLE V	 	 	 	 
	 

	 	REPRESENTATIONS AND WARRANTIES OF NEWCO	 	 	 	 
	 
	 	 	 	 	 	 
	Section 5.1

	 	Corporate Status
	 	 	28	 
	Section 5.2

	 	Due Authorization, Execution and Delivery; Enforceability
	 	 	28	 
	Section 5.3

	 	No Conflicts
	 	 	28	 
	Section 5.4

	 	Consents
	 	 	29	 
	Section 5.5

	 	Litigation and Claims
	 	 	29	 
	Section 5.6

	 	Financial Sophistication
	 	 	29	 
	Section 5.7

	 	Finders’ Fees
	 	 	29	 
	Section 5.8

	 	Investor Equity Commitment Letters
	 	 	29	 
	Section 5.9

	 	No Other Representations or Warranties
	 	 	29	 
	 
	 	 	 	 	 	 
	 

	 	ARTICLE VI	 	 	 	 
	 

	 	COVENANTS	 	 	 	 
	 
	 	 	 	 	 	 
	Section 6.1

	 	Access and Information
	 	 	29	 
	Section 6.2

	 	Conduct of the Business
	 	 	30	 
	Section 6.3

	 	Disentanglement
	 	 	32	 
	Section 6.4

	 	Debt Financing
	 	 	32	 
	Section 6.5

	 	Retention of Records
	 	 	32	 
	Section 6.6

	 	Reasonable Best Efforts
	 	 	33	 
	Section 6.7

	 	Antitrust
	 	 	33	 
	Section 6.8

	 	Employee Matters
	 	 	34	 
	Section 6.9

	 	Tax Matters
	 	 	35	 
	Section 6.10

	 	Release of Obligations
	 	 	41	 
	Section 6.11

	 	Further Assurances
	 	 	42	 
	Section 6.12

	 	Non-Solicit
	 	 	42	 
	Section 6.13

	 	Confidentiality
	 	 	43	 
	Section 6.14

	 	Dividends
	 	 	44	 
	Section 6.15

	 	Ancillary Agreements
	 	 	44	 

- ii -

 

	 	 	 	 	 	 	 
	 

	 	ARTICLE VII	 	 	 	 
	 

	 	CONDITIONS TO CLOSING	 	 	 	 
	 
	 	 	 	 	 	 
	Section 7.1

	 	Conditions to the Obligations of Newco and Philips
	 	 	44	 
	Section 7.2

	 	Conditions to the Obligations of Newco
	 	 	45	 
	Section 7.3

	 	Conditions to the Obligations of Philips
	 	 	46	 
	 
	 	 	 	 	 	 
	 

	 	ARTICLE VIII	 	 	 	 
	 

	 	SURVIVAL; INDEMNIFICATION; CERTAIN REMEDIES	 	 	 	 
	 
	 	 	 	 	 	 
	Section 8.1

	 	Survival
	 	 	46	 
	Section 8.2

	 	Indemnification by Philips
	 	 	46	 
	Section 8.3

	 	Indemnification by Newco
	 	 	47	 
	Section 8.4

	 	Third Party Claim Indemnification Procedures
	 	 	47	 
	Section 8.5

	 	Adjustments to Losses
	 	 	50	 
	Section 8.6

	 	Payments
	 	 	50	 
	Section 8.7

	 	Characterization of Indemnification Payments
	 	 	51	 
	Section 8.8

	 	Mitigation
	 	 	51	 
	Section 8.9

	 	Remedies
	 	 	51	 
	Section 8.10

	 	Waiver
	 	 	52	 
	 
	 	 	 	 	 	 
	 

	 	ARTICLE IX	 	 	 	 
	 

	 	TERMINATION	 	 	 	 
	 
	 	 	 	 	 	 
	Section 9.1

	 	Termination
	 	 	52	 
	Section 9.2

	 	Effect of Termination
	 	 	52	 
	 
	 	 	 	 	 	 
	 

	 	ARTICLE X	 	 	 	 
	 

	 	MISCELLANEOUS	 	 	 	 
	 
	 	 	 	 	 	 
	Section 10.1

	 	Notices
	 	 	52	 
	Section 10.2

	 	Amendment; Waiver
	 	 	57	 
	Section 10.3

	 	No Assignment or Benefit to Third Parties
	 	 	57	 
	Section 10.4

	 	Entire Agreement
	 	 	57	 
	Section 10.5

	 	Fulfillment of Obligations
	 	 	57	 
	Section 10.6

	 	Public Disclosure
	 	 	57	 
	Section 10.7

	 	Expenses
	 	 	58	 
	Section 10.8

	 	Due Diligence Information; Schedules
	 	 	58	 
	Section 10.9

	 	Governing Law; Submission to Jurisdiction; Selection of Forum
	 	 	58	 
	Section 10.10

	 	Counterparts
	 	 	58	 
	Section 10.11

	 	Headings
	 	 	58	 
	Section 10.12

	 	Severability
	 	 	58	 

- iii -

 

EXHIBITS AND SCHEDULES

	 	 	 
	EXHIBITS
	 	 
	Exhibit 1.1(a)

	 	List of Ancillary Agreements
	Exhibit 1.1(b)

	 	List of Management Presentations
	Exhibit 1.1(c)

	 	Intellectual Property Transfer and License
Agreement
	Exhibit 1.1(d)

	 	Estimate of commissions, fees and
expenses
	 
	 	 
	SCHEDULES
	 	 
	Schedule 1.1(a)*

	 	Disclosure Letter
	Schedule 1.1(b)

	 	Antitrust Approvals
	Schedule 1.1(c)*

	 	Disentanglement
	Schedule 1.1(d)*

	 	Philips Knowledge Group
	Schedule 1.1(e)*

	 	Company Knowledge Group
	Schedule 1.1(f)*

	 	Newco Knowledge Group
	Schedule 2.3

	 	Form of Notarial Deed
	Schedule 2.6(c)*

	 	Relevant Third Party Consent Entity Valuation Amounts
	Schedule 2.7(a)(i)*

	 	Form of Closing Date Net Cash Statement
	Schedule 2.7(a)(ii)*

	 	Form of Closing Date Net Working Capital
Statement
	Schedule 2.7(a)(iii)

	 	Specific Accounting Methods, Policies and
Procedures
	Schedule 3.7*

	 	Philips Equity Commitment Letter
	Schedule 4.1(a)*

	 	Company Subsidiaries
	Schedule 4.1(b)

	 	Organizational Documents of Company
	Schedule 4.5(d)*

	 	Minority Interests
	Schedule 4.6*

	 	Audited Financial Statements
	Schedule 4.11(a)*

	 	Benefit Plans
	Schedule 4.13(a)*

	 	Owned Real Property
	Schedule 4.13(b)*

	 	Leased Real Property
	Schedule 4.16*

	 	Material Contracts
	Schedule 4.18*

	 	Insurance Policies
	Schedule 4.19*

	 	Sufficiency of Assets Carve-out
	Schedule 4.20*

	 	Debt Commitment Letter
	Schedule 5.8*

	 	Investor Equity Commitment Letters
	Schedule 6.2(b)*

	 	Permitted Conduct
	Schedule 6.8(c)

	 	Certain Employee Matters

 

		
	*	Incorporated by reference to the
corresponding schedule to the draft of this
Agreement
attached to the Offer Letter.

- iv -

 

     STOCK PURCHASE AGREEMENT, dated as of September 28, 2006, among Koninkljke Philips
Electronics N.V., a limited liability company incorporated under the laws of The Netherlands
(“Philips”), Philips Semiconductors International B.V. (currently being renamed NXP B.V.),
a limited liability company incorporated under the laws of The Netherlands (the “Company”)
and KASLION Acquisition B.V., a limited liability company incorporated under the laws of The
Netherlands (“Newco”).

W I T N E S E T H:

     WHEREAS, Philips owns all of the issued and outstanding shares, par value €455 per share
(the “Company Shares”), of the Company;

     WHEREAS, Philips is engaged worldwide in the business of developing, designing,
manufacturing, assembling, selling and distributing semiconductors and certain other components
for applications primarily in the home, mobile and personal, and automotive and identification
markets as well as multi-market semiconductors, and certain related software licensing activities,
all of which, as of the Closing, will be conducted through the Company and the Company
Subsidiaries as more fully described in the Disentanglement Schedule (the “Business”) and
reflected in the Audited Financial Statements;

     WHEREAS, Philips desires to sell to Newco and Newco desires to purchase from Philips the
Company Shares upon the terms and conditions set forth in this Agreement;

     WHEREAS, Philips, the Company and Newco desire to make certain representations,
warranties, covenants and agreements in connection with this Agreement;

     WHEREAS, Philips and the Company have received the Debt Commitment Letter from the
Financing Banks, confirming the Financing Banks’ commitment to provide the Company with the
Debt Financing;

     WHEREAS, Philips and its Affiliates (excluding the Company and the Company Subsidiaries), on
the one hand, and the Company and the Company Subsidiaries, on the other hand, have entered or
shall enter, at or prior to Closing, into the Ancillary Agreements governing their relationship in
the period following the Closing; and

     WHEREAS, the Investors have executed and delivered to each of Newco and Philips the equity
commitment letters attached hereto as Schedule 5.8 (the “Investor Equity Commitment
Letters”) and Philips has executed and delivered to Newco and the Investors the equity
commitment letter attached hereto as Schedule 3.7 (the “Philips 
Equity Commitment Letter” and, together with the Investor Equity Commitment Letters,
the “Equity Commitment Letters”);

- 1 -

 

     NOW, THEREFORE, in consideration of the premises and the mutual representations, warranties,
covenants and undertakings contained in this Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties, intending
to be legally bound, agree as follows:

ARTICLE I 

DEFINITIONS AND TERMS 

     Section 1.1 Certain Definitions. As used in this Agreement, the following terms
have the meanings set forth below:

          “Adjustment Amount” has the meaning set forth in Section 2.7(e).

          “Affiliate” means, with respect to any Person, any Person directly or indirectly
controlling, controlled by, or under common control with such other Person as of the date on which,
or at any time during the period for which, the determination of affiliation is being made,
provided that, with respect to Philips, in respect of any period commencing at or after the
Closing, Affiliate shall not include the Company and the Company Subsidiaries. For purposes of this
definition, the term “control” (including the correlative meanings of the terms “controlled by” and
“under common control with”), as used with respect to any Person, means the possession, directly or
indirectly, of the power to direct or cause the direction of the management policies of such
Person, whether through the ownership of voting securities or by contract or otherwise.

          “Agreement” means this Stock Purchase Agreement, including all Schedules and Exhibits
thereto, as the same may be amended, supplemented or otherwise modified from time to time in
accordance with the terms hereof.

          “Amsterdam Business Day” means any day other than a Saturday, a Sunday or a day on
which commercial banks in Amsterdam are open for normal business.

          “Ancillary Agreements” means the agreements listed in Exhibit 1.1(a), which will
be effective prior to or as of the Closing Date.

          “Antitrust Approvals” means the approvals listed in Schedule 1.1(b).

          “Antitrust Laws” means the Laws identified in Schedule 1.1(b).

          “Assets” means all assets, both tangible and intangible, of every kind, nature
and description.

          “Audited EBIT Statement” has the meaning set forth in Section 4.6.

          “Audited Financial Statements” has the meaning set forth in Section 4.6.

- 2 -

 

          “Audited Net Operating Capital Statement” has the meaning set forth in Section 4.6.

          “Benefit Plans” has the meaning set forth in Section 4.11(a)(i).

          “Business” has the meaning set forth in the Preamble.

          “Business Day” means each day that is an Amsterdam Business Day and a New York
Business Day.

          “Claim Notice” has the meaning set forth in Section 8.4(a).

          “Closing” has the meaning set forth in Section 2.3.

          “Closing Conditions” has the meaning set forth in Section
2.3.

          “Closing Date” has the meaning set forth in Section 2.3.

          “Closing Date Financial Statements” has the meaning set forth in Section 2.7(a).

          “Closing Date Net Cash Position” has the meaning set forth in Section 2.7(a).

          “Closing Date Net Cash Statement” has the meaning set forth in Section 2.7(a).

          “Closing Date Net Working Capital” has the meaning set forth in Section 2.7(a).

          “Closing Date Net Working Capital Statement” has the meaning set forth in Section
2.7(a).

          “Code” means the Internal Revenue Code of 1986, as amended.

          “Company” has the meaning set forth in the Preamble.

          “Company Premises” means all Owned Real Property, Leased Real Property, buildings and
adjuncts of the Company and the Company Subsidiaries at which the Business is carried out.

          “Company Securities” means any shares of capital stock or other equity interests in,
or securities of, the Company or any Company Subsidiary or any securities, rights or obligations
convertible into, exchangeable for or exercisable to acquire any securities of the Company or any
Company Subsidiary.

          “Company Shares” has the meaning set forth in the Preamble.

- 3 -

 

          “Company Subsidiary” means, as of any date, any Subsidiary of the Company and, in
respect of any period ending prior to the Closing, any Subsidiary of Philips carrying on any
part of the Business at the relevant time.

          “Company X” has the meaning set forth in Section 8.2(a).

          “Company X Claims” has the meaning set forth in Section 8.2(a).

          “Company X Losses” has the meaning set forth in Section 8.2(a).

          “Consent” means any consent, approval, clearance, compliance, exemption,
authorization, order, filing, registration or qualification of or with any Person, including any
waiver of unilateral termination or similar rights upon a change of control of any Person.

          “Debt Commitment Letter” has the meaning set forth in Section 4.20.

          “Debt Financing” means the debt financing for the Debt Financing Amount set forth
in the Debt Commitment Letter (which, for the avoidance of doubt, excludes the Revolving
Credit Facility).

          “Debt Financing Amount” means an amount in euros equal to
€4,500,000,000.

          “Deferred Closing Date” has the meaning set forth in Section 2.6(b).

          “Disentanglement” means the transfer by Philips, either directly or through its Affiliates
(excluding the Company and the Company Subsidiaries), to the Company or one or more of the
Company Subsidiaries of certain Assets and Liabilities relating to the Business and the
Employees, as more fully described in the Disentanglement Schedule.

          “Disentanglement Schedule” means Schedule 1.1(c).

          “Due Diligence Information” means any information which could reasonably be expected
to be apparent from a prima facie review of the following: (a) the information contained in the
Virtual Data Room on July 26, 2006, (b) the documents and written information provided to the
Investors and their representatives and advisors during and pursuant to question and answer
sessions and (c) the documents and written information provided to the Investors and their
representatives and advisors in the management presentations held on July 5, 6, 7, 10, 11, 12, 13,
14, 17, 18, 19, 20, 21, 24 and 25, 2006, as listed in Exhibit 1.1(b), all of which are
electronically stored on the DVDs previously delivered by Philips to Newco.

          “Employees” means all Persons who immediately prior to the Closing will be employed by
Philips or any Affiliate of Philips exclusively in the Business, including,

- 4 -

 

in each case, those who are on short-term disability as of the Closing and any other
corporate or administrative employees that are intended to be transferred as agreed between
Philips and Newco pursuant to the Disentanglement Schedule.

          “Encumbrance” means any lien, pledge, charge, claim, encumbrance, security
interest, option, mortgage, easement, or other restriction of any kind.

          “Environmental Law” means any Law and any Governmental Authorization concerning
the protection of the environment and health and safety (including air, surface water,
groundwater, drinking water supply, and surface or subsurface land or structures), or the use,
storage, recycling, treatment, generation, transportation, processing, handling, labeling,
management, release or disposal of, any hazardous substance or waste material.

          “Equity Commitment Letters” has the meaning set forth in the Preamble.

          “EU” means the European Union.

          “EURIBOR” means the six-month interbank offered rate with respect to deposits in
Euros which appears on the Moneyline Telerate page 248 as of 11:00 a.m., London time, on the day
that is two Business Days preceding the Closing.

          “Exchange Act” means the U.S. Securities Exchange Act of 1934, as amended.

          “Exhibits” means the Exhibits listed under “Exhibits and Schedules” and attached to
this Agreement.

          “Financing Banks” means Morgan Stanley Senior Funding Inc., Morgan Stanley Bank
International Limited, Deutsche Bank Securities Inc., Deutsche Bank AG London Branch, Deutsche
Bank AG New York Branch, Deutsche Bank AG Cayman Islands Branch, Merrill Lynch, Pierce Fenner &
Smith Incorporated and Merrill Lynch Capital Corporation.

          “GAAP” means generally accepted accounting principles in the United States.

          “Governmental Authority” means any federal, state or local court, administrative
body or other governmental or quasi-governmental entity with competent jurisdiction.

          “Governmental Authorizations” means all licenses, permits, certificates and other
authorizations and approvals issued by or obtained from a Governmental Authority or
Self-Regulatory Organization.

- 5 -

 

          “Governmental Order” means any order, writ, judgment, injunction, decree,
declaration, stipulation, determination or award entered by or with any Governmental
Authority.

          “Indebtedness” means (a) all liabilities for borrowed money, whether current or
funded, secured or unsecured, all obligations evidenced by bonds, debentures, notes or similar
instruments, and all liabilities in respect of mandatorily redeemable or purchasable capital stock
or securities convertible into capital stock; (b) all liabilities for the deferred purchase price
of property; (c) all liabilities in respect of any lease of (or other arrangement conveying the
right to use) real or personal property, or a combination thereof, which liabilities are required
to be classified and accounted for under GAAP as capital leases and (d) all liabilities for the
reimbursement of any obligor on any letter of credit, banker’s acceptance or similar credit
transaction securing obligations of a type described in clauses (a), (b) or (c) above to the
extent of the obligation secured, and all liabilities as obligor, guarantor, or otherwise, to the
extent of the obligation secured.

          “Indemnified Parties” has the meaning set forth in Section 8.4(a).

          “Indemnifying Party” has the meaning set forth in Section 8.4(a).

          “Independent Accountant” means the Amsterdam office of

PricewaterhouseCoopers or such other firm of independent certified public accountants as to which
Philips and Newco shall mutually agree.

          “Initial Closing Antitrust Approvals” means the approvals identified in Schedule
1.1(b) as Initial Closing Antitrust Approvals.

          “Initial Closing Antitrust Laws” means the Laws identified in Schedule
1.1(b) in relation to the Initial Closing Antitrust Approvals.

          “Intellectual Property” has the meaning set forth in the Intellectual
Property Transfer and License Agreement.

          “Intellectual Property Transfer and License Agreement” means the Intellectual
Property Transfer and License Agreement between Philips and the Company, substantially in the form
of Exhibit 1.1(c), which will be effective prior to or as of the Closing Date.

          “Intercompany Accounts” means all balances related to Indebtedness, excluding
trade receivables and trade payables, between Philips and its Subsidiaries (other than the
Company and the Company Subsidiaries) on the one hand, and the Company and the Company
Subsidiaries, on the other hand.

          “Intercompany Loans” has the meaning set forth in Section 6.10(c).

- 6 -

 

          “Investor Equity Commitment Letters” has the meaning set forth in the Preamble.

          “Investors” means KKR European Fund II, Limited Partnership, KKR Millenium Fund
(Overseas), Limited Partnership, Silver Lake Partners II, Cayman, L.P. and AlpInvest CS
Investments 2006 C.V.

          “Ji-Lin” has the meaning set forth in Section 2.6.

          “Knowledge” or any similar phrase means the actual knowledge, after reasonable
inquiry, of, in the case of Philips, the individuals named in Schedule 1.1(d), in the case of the
Company, the individuals named in Schedule 1.1(e) and, in the case of Newco, the individuals named
in Schedule 1.1(f).

          “Law” means any law, statute, ordinance, rule, regulation, code, order, judgment,
injunction or decree enacted, issued, promulgated, enforced or entered by a Governmental
Authority or Self-Regulatory Organization.

          “Leased Real Property” has the meaning set forth in Section 4.13(b).

          “Leases” has the meaning set forth in Section 4.13(b).

          “Legal Proceeding” means a civil, criminal or administrative action, suit,
proceeding, claim, arbitration, hearing or investigation, including any final judgment, order or
decree resulting therefrom.

          “Liabilities” means any and all debts, liabilities, commitments and obligations of
any kind, whether fixed, contingent or absolute, matured or unmatured, liquidated or unliquidated,
accrued or not accrued, asserted or not asserted, known or unknown, determined, determinable or
otherwise, whenever or however arising (whether arising out of any contract or tort based on
negligence or strict liability) and whether or not the same would be required by GAAP to be
reflected in financial statements or disclosed in the notes thereto.

          “Losses” means all damages, losses, costs (including reasonable legal fees and
expenses and reasonable experts’ and consultants’ fees), charges and expenses assessed in
accordance with Article 6:96 et. seq. of the Dutch Civil Code, but excluding any loss of profit,
loss of revenue, loss of goodwill and any other indirect or consequential losses, provided that
the aforesaid exclusion shall not extend to any loss of profit, loss of revenue, loss of goodwill
or any indirect or consequential losses suffered by customers, suppliers or other contract parties
for which the Company or a Company Subsidiary is or becomes liable, it being understood that for
the purposes of calculating the quantum of such Losses suffered by Newco, Newco’s Losses shall be
deemed to include the amount required to put the Company and/or relevant Subsidiary in the
position it would have been in had there been no breach of the relevant provision of this
Agreement, provided, however, that any such amounts shall be calculated as aforesaid

- 7 -

 

and, without limitation, shall exclude any loss of profit, loss of revenue, loss of goodwill or
any indirect or consequential losses.

          “Material Contracts” has the meaning set forth in Section 4.16.

          “Mitigation Actions” has the meaning set forth in Section 8.8.

          “Net Cash Position” means, as of any date, an amount equal to the sum of the cash and
debt items of the Company or any Company Subsidiary, calculated on a consolidated basis, to the
extent such items are included in the line items set out in the form of the Net Cash Statement,
attached hereto as Schedule 2.7(a)(i).

          “Net Debt Financing Amount” means €3,765,970,000, being
the Debt Financing Amount
minus the sum of (a) an amount of €130,030,000 representing the agreed amount of the commissions,
fees and expenses to be paid in connection with the Debt Financing and the agreed amount of the
commissions, fees and expenses paid or payable as of the Closing Date in connection with the
Revolving Credit Facility (which has been determined as set forth in Exhibit 1.1(d)) and (b) an
amount of €604,000,000 to be retained by the Company.

          “Net Working Capital” means the sum of the working capital items of the Company and
the Company Subsidiaries, calculated on a consolidated basis, to the extent such items are included
in the line items set out in the form of the Net Working Capital Statement, attached hereto as
Schedule 2.7(a)(ii).

          “New York Business Day” means any day other than a Saturday, a Sunday or a day on
which commercial banks in New York City are authorized or obligated by Law or executive order to
close.

          “Newco” has the meaning set forth in the Preamble.

          “Newco Material Adverse Effect” means an effect that is materially adverse to the
ability of Newco to consummate the Transaction, either at all or on the time schedule
contemplated by this Agreement.

          “Newco’s Objection” has the meaning set forth in Section 2.7(b).

          “Notary” means Jean Schoonbrood or another notary of De Brauw Blackstone
Westbroek N.V., or, in each case, his or her substitute.

          “Notice Period” has the meaning set forth in Section 8.4(a).

          “Offer Letter” means the letter agreement, dated August 3, 2006, among Philips,
Newco and KASLION Holding B.V., a limited liability company organized under the laws of The
Netherlands.

- 8 -

 

          “Ordinary
Course” or “Ordinary Course of Business” means the conduct of the Business
in accordance with normal day-to-day customs, practices and procedures and consistent with past
practice.

          “Organizational Documents” means with respect to any corporation, its articles or
certificate of incorporation and by-laws, and with respect to any other type of entity, its
organizational documents.

          “Owned Real Property” has the meaning set forth in Section 4.13(a).

          “Parties” means each of Philips, the Company and Newco.

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

          “Philips” has the meaning set forth in the Preamble.

          “Philips Equity Commitment Letter” has the meaning set forth in the Preamble.

          “Philips Intellectual Property” has the meaning set forth in the Intellectual
Property Transfer and License Agreement.

          “Philips Material Adverse Effect” means a change, effect, circumstance or development
that is materially adverse to the financial condition, properties, assets, liabilities, business or
results of operations of the Business, taken as a whole; provided that none of the following (or
the results thereof), in and of themselves, shall be deemed to give rise to a Philips Material
Adverse Effect: (a) any change after the date hereof in Law or generally accepted accounting
principles, or interpretations thereof, applicable to the Business, (b) any change in economic
conditions or financial markets generally, (c) any change in business conditions or industry-wide
factors generally affecting the semiconductor industry, (d) any acts of war, declared or
undeclared, armed hostilities, sabotage or terrorism, (e) any loss of, or adverse change in the
relationship with, employees, customers or suppliers of the Business proximately caused by the
pendency or the announcement of the Transaction or the other transactions contemplated by this
Agreement, (f) any failure to meet any estimates of revenues or earnings for the Business for any
period ending on or after the date of this Agreement and prior to the Closing, provided that the
exception in this clause (f) shall not prevent or otherwise affect a determination that any change,
effect, circumstance or development underlying such a failure has resulted in a Philips Material
Adverse Effect or (g) the receipt by the Company of the Debt Financing Amount and the payment by
the Company of the Net Debt Financing Amount to Philips in accordance with Section 6.10(c); and
provided, further, that with respect to clauses (b), (c) and (d), such change, effect, circumstance
or development does not (i) primarily relate only to (or have the effect of primarily relating

- 9 -

 

only to) the Business or (ii) disproportionately adversely affect the Business compared to other
companies of similar size operating in the semiconductor industry.

          “Post-Closing Tax Period” has the meaning set forth in Section
6.9(a)(iii).

          “Pre-Closing Tax Period” has the meaning set forth in Section 6.9(a)(iii).

          “Purchase”
has the meaning set forth in Section 2.1.

           “Purchase
Price” has
the meaning set forth in Section 2.2.

          “Reference Net Cash Position” means €146 million.

          “Reference Net Working Capital” means €491 million.

          “Registered Intellectual Property” has the meaning set forth in the
Intellectual Property Transfer and License Agreement.

          “Related Claims” has the meaning set forth in Section 8.4(f).

          “Relevant Third Party Consent Entity” has the meaning set forth in Section
2.6(a).

          “Remaining Disagreements” has the meaning set forth in Section 2.7(c).

          “Revolving Credit Facility” means the €500 million
revolving credit facility
set forth in the Debt Commitment Letter.

          “Schedules” means the Schedules listed under “Exhibits and Schedules” and attached
to this Agreement.

          “Self-Regulatory Organization” means the National Association of Securities Dealers,
Inc., the American Stock Exchange, the National Futures Association, the Chicago Board of Trade,
the New York Stock Exchange, any national securities exchange (as defined in the Exchange Act), any
other securities exchange, futures exchange, contract market, any other exchange or corporation or
similar self-regulatory body or organization.

          “Straddle Tax Period” has the meaning set forth in Section 6.9(a)(iii).

          “Subsidiary” means with respect to any Person (other than a natural Person) any other
Person of which (i) the first mentioned Person or any Subsidiary thereof is a general partner,
(ii) voting power to elect a majority of the board of directors or others performing similar
functions with respect to such other Person is held by the first mentioned Person and/or by any
one or more of its Subsidiaries, or (iii) at least 50%

- 10 -

 

of the equity interests of such other Person is, directly or indirectly, owned or controlled
by such first mentioned Person and/or by any one or more of its Subsidiaries.

          “Subscription Agreement” means the Subscription Agreement, dated as of the date
hereof, among Newco, KASLION Holding B.V., Philips and Stichting Management Co-Investment NXP.

          “Tax Returns” means all reports and returns required to be filed with respect
to Taxes.

          “Taxes” means all forms of taxation, whether direct or indirect, including income,
gross receipts, windfall profits, value added, severance, property, production, sales, use, duty,
license, excise, franchise, employment, withholding or similar taxes, (including social security
contributions and any other payroll taxes), together with any interest, additions or penalties
with respect thereto imposed by any governmental, taxing or other authority responsible for the
imposition, administration or collection of any Tax (a “Taxing Authority”) and any
interest in respect of such additions or penalties.

          “Taxing Authority” has the meaning set forth in the definition of Taxes in this
Section 1.1.

          “Tax Matter” has the meaning set forth in Section 6.9(e).

          “Third Party Claim” has the meaning set forth in Section 8.4(a).

          “Third Party Consent Entity” has the meaning set forth in Section 2.6.

          “Transaction” means the purchase and sale of the Company Shares pursuant to, and the
other transactions contemplated by or referred to in, this Agreement, including the
Disentanglement.

          “Virtual Data Room” means the electronic data room created for purposes of the
Transaction contemplated hereby and maintained by IntraLinks, Inc.

     Section 1.2 Other Terms. Other terms may be defined elsewhere in the text of this
Agreement and, unless otherwise indicated, shall have such meaning throughout this Agreement.

     Section 1.3 Other Definitional Provisions. Unless the express context
otherwise requires:

     (a) Unless otherwise specifically indicated, the word “day” means “calendar day”;

- 11 -

 

     (b) the words “hereof”, “herein”, “hereunder” and “hereby” and words of similar import, when
used in this Agreement, shall refer to this Agreement as a whole and not to any particular
provision of this Agreement;

     (c) the terms defined in the singular have a comparable meaning when used in the plural, and
vice versa;

     (d) the terms “Dollars” and “$” mean U.S. Dollars;

     (e) the terms “euros” and “€” mean Euros;

     (f) references in this Agreement to a specific Section, Subsection or Schedule shall refer,
respectively, to Sections, Subsections or Schedules of this Agreement;

     (g) wherever the word “include,” “includes,” or “including” is used in this Agreement, it
shall be deemed to be followed by the words “without limitation”;

     (h) references in this Agreement or in any Exhibit or Schedule to “North” shall refer to
Philips and to “Lion” shall refer to the Company;

     (i) references in this Agreement to any gender include each other gender; and

     (j) references in this Agreement to “the date hereof”, “the date of this Agreement” and
similar references shall refer to August 3, 2006, being the date of the Offer Letter.

ARTICLE II

PURCHASE AND SALE 

     Section 2.1 Purchase and Sale of Shares. Upon the terms and subject to the
conditions set forth in this Agreement, Philips agrees to sell and transfer the Company Shares to
Newco, and Newco agrees to purchase the Company Shares from Philips, free and clear of all
Encumbrances (the “Purchase”).

     Section 2.2 Consideration. Upon the terms and subject to the conditions of this
Agreement, at the Closing, in consideration for the Company Shares, Newco shall pay to Philips an
amount in cash equal to €4,305,030,000, being €4,175,000,000 plus an additional amount of
€130,030,000 representing the agreed amount of the commissions, fees and expenses to be paid in
connection with the Debt Financing and the agreed amount of the commissions, fees and expenses paid
or payable as of the Closing Date in connection with the Revolving Credit Facility (which has been
determined as set forth in Exhibit 1.1(d)) (together, the “Purchase Price”), subject to
adjustment for the Adjustment Amount as provided in Section 2.7. €854,313,000 of the Purchase
Price shall be paid by way of a set-off against the Philips Subscription Price (as defined in the
Subscription Agreement).

- 12 -

 

     Section 2.3 Closing. The closing of the Purchase (the “Closing”) shall take place at
the offices of De Brauw Blackstone Westbroek N.V., Tripolis, Burgerweeshuispad 301, 1076 HR
Amsterdam, The Netherlands, on the fifth Business Day following the satisfaction or waiver of such
conditions or, in Philips’ discretion, on the last Business Day of the monthly reporting period of
Philips in which such satisfaction or waiver occurred (other than with respect to those conditions
that by their nature are to be satisfied at the Closing but subject to the satisfaction or waiver
of such conditions) (the “Closing Conditions”) or at such other place and time as the
Parties may agree. Philips shall provide Newco with written notice of its election pursuant to the
preceding sentence at least five Business Days prior to the Closing Date. The Parties agree that
time is of the essence in causing the Closing to occur and shall use their reasonable efforts to
cause the Closing to occur as promptly as possible. The date on which Closing occurs is referred
to in this Agreement as the “Closing Date”. At the Closing, Philips shall transfer the
Company Shares to Newco and Newco shall accept the Company Shares from Philips and acknowledge the
transfer. The transfer, acceptance and acknowledgment shall be affected before the Notary by way
of a notarial deed substantially in the form set forth as Schedule 2.3.

     Section 2.4 Deliveries by Philips and the Company. At the Closing, Philips and
the Company shall deliver, or cause to be delivered, to Newco the following:

     (a) the certificate to be delivered pursuant to Section 7.2(c);

     (b) such other customary instruments of transfer, assumptions, filings or documents, in form
and substance reasonably satisfactory to Newco, as may be required to give effect to this
Agreement; and

     (c) at the election of Philips, either a written assignment of all of the rights of Philips
and any of its Affiliates under all of the confidentiality agreements concluded in the context of
the process leading up to this Transaction as well as all the alternative options referred to in
Section 4.7 or a written undertaking by Philips to enforce same at Newco’s sole direction and
expense.

     Section 2.5 Deliveries by Newco. At the Closing, Newco shall deliver to
Philips the following:

     (a) the certificate to be delivered pursuant to Section 7.3(c); and

     (b) such other customary instruments of transfer, assumptions, filings or documents, in form
and substance reasonably satisfactory to Philips, as may be required to give effect to this
Agreement.

     Section 2.6 Deferred Closing. In the event that any Person whose Consent is required
to effect the transfer of Philips’ direct and indirect interests in Advanced Semiconductor
Manufacturing Corporation Limited or Philips Ji-Lin Semiconductors Co.

- 13 -

 

Ltd. (“Ji-Lin”, and each, a “Third Party Consent Entity”) from Philips and its
Affiliates to the Company or one of the Company Subsidiaries has not given such consent:

     (a) The Closing shall proceed as described in Section 2.3, except that the Closing shall be
deferred with respect to any Third Party Consent Entity for which not all Persons whose Consent is
required to effect the transfer of such Third Party Consent Entity have given such consent at or
before the Closing (each, a “Relevant Third Party Consent Entity”).

     (b) The Closing in respect of each Relevant Third Party Consent Entity shall take place at
the offices of De Brauw Blackstone Westbroek N.V., Tripolis, Burgerweeshuispad 301, 1076 HR
Amsterdam, The Netherlands, on the first Business Day of the month following the month in which
all relevant Consents for the transfer of such Relevant Third Party Consent Entity have been
obtained (the “Deferred Closing Date”) or at such other place and time as the Parties may
agree.

     (c) If any Consents with respect to any Relevant Third Party Consent Entity remain outstanding
at June 30, 2007, this Agreement shall cease to apply in respect of such Relevant Third Party
Consent Entity as if such Relevant Third Party Consent Entity was never included in the
Transaction, whereupon Philips shall pay to Newco the amount of cash corresponding to such Relevant
Third Party Consent Entity as set forth in Schedule 2.6(c).

     (d) The Parties shall cooperate to ensure that, until Closing occurs in respect of each
Relevant Third Party Consent Entity, all commercial relations and contracts between, on the one
hand, that portion of the Business in respect of which Closing takes place as scheduled in Section
2.3, and, on the other hand, the Relevant Third Party Consent Entity, are maintained in the
Ordinary Course of Business and, for the avoidance of doubt, the provisions of the last sentence of
Section 6.11 shall apply to any Relevant Third Party Consent Entity.

     Section 2.7 Post-Closing Adjustment.

     (a) Preparation of Closing Date Net Cash Statement and Net Working Capital Statement.
Philips shall as soon as practicable, and in no event later than ninety (90) days after the Closing
Date, prepare or cause to be prepared (i) a consolidated net cash statement for the Company and the
Company Subsidiaries as of the Closing Date substantially in the form set forth in Schedule
2.7(a)(i) (the “Closing Date Net Cash Statement”) and (ii) a consolidated net working
capital statement for the Company and the Company Subsidiaries as of the Closing Date substantially
in the form set forth in Schedule 2.7(a) (the “Closing Date Net Working Capital Statement”
and, together with the Closing Date Net Cash Statement, the “Closing Date Financial
Statements”). The Closing Date Financial Statements shall be prepared in accordance with (i)
the accounting methods, policies, practices and procedures set forth on Schedule 2.7(a)(iii), (ii)
to the extent supplemental guidance is required, the past accounting methods,

- 14 -

 

policies, practices and procedures of Philips and the Company and in the same manner, with
consistent classification and estimation methodology, as the Audited Net Operating Capital
Statement, and (iii) to the extent further supplemental guidance is required, GAAP. Upon
completion of the Closing Date Financial Statements, Philips shall derive from the Closing Date
Net Cash Statement the Net Cash Position as of the Closing Date (the “Closing Date Net Cash
Position”) and from the Closing Date Net Working Capital Statement the Net Working Capital as
of the Closing Date (the “Closing Date Net Working Capital”) and deliver each such
statement along with such amounts to Newco.

     (b) Review of Closing Date Financial Statements. Newco shall complete its review of
the Closing Date Financial Statements within thirty (30) days after delivery thereof by Philips. In
the event that Newco determines that the Closing Date Financial Statements have not been prepared
on the basis set forth in Section 2.7(a), Newco shall, on or before the last day of such 30-day
period, so inform Philips in writing (such writing, “Newco’s Objection”), setting forth a
detailed description of the basis of Newco’s determination and the adjustments to the Closing Date
Financial Statements that Newco believes should be made; provided, however, that (i) no item of
dispute shall be the subject of Newco’s Objection unless the amount proposed by Newco for such item
differs from the amount of such item for purposes of the preparation of the Closing Date Financial
Statements delivered pursuant to Section 2.7(a) by more than €250,000 and the aggregate amount
of Newco’s adjustments would cause the Closing Date Financial Statements (if accepted in accordance
with the succeeding paragraph) to differ from the Closing Date Financial Statements delivered
pursuant to Section 2.7(a) by more than €10 million, in which case the entire amounts and not
just the excess over €250,000 or €10 million, as the case may be, may be proposed; (ii)
unless a proposal is made based on a consistent application of the accounting methods, policies,
practices and procedures set forth in Section 2.7(a), no item of dispute shall be the subject of
Newco’s Objection that is based on developments after the Closing Date or involves a judgment as to
the future prospects of the Business or similar matters that are forward-looking in nature; and
(iii) no adjustments shall be permitted to the extent they relate to (A) the specific indemnity
rights set out in this Agreement relating to Company X Claims, Company X Losses or Related Claims,
(B) the specific Tax indemnities set out in Section 6.9 (but for the avoidance of doubt it being
understood that if a particular Tax Liability is included in the definition of Closing Date Net
Working Capital, nothing shall prevent Newco from proposing adjustments for such items and if and
to the extent such items result in an adjustment of the Purchase Price there shall be no double
claim under Section 6.9) or (C) matters that are the subject of a settled indemnification claim
already notified under this Agreement. In connection with, and as a condition to, the resolution of
Newco’s Objection, Philips and Newco shall enter into an agreement stating that such resolution
shall foreclose any right to indemnification with respect to the matters at issue to the extent
they would otherwise also have been recoverable pursuant to Section 8.2. If no Newco’s Objection is
received by Philips on or before the last day of such 30-day period, then the Closing Date Net Cash
Position and the Closing Date Net Working Capital

- 15 -

 

derived from the Closing Date Net Financial Statements delivered by Philips to Newco shall be
final.

     (c) Determination by Independent Accountant. Philips shall have thirty (30) days from
its receipt of Newco’s Objection to review and respond to Newco’s Objection. If Philips and Newco
are unable to resolve all of their disagreements with respect to the proposed adjustments set forth
in Newco’s Objection within fifteen (15) days following the completion of Philips’ review of
Newco’s Objection, each of them shall have the right to refer any remaining disagreements (the
“Remaining Disagreements”) to the Independent Accountant which, acting as experts and not
as arbitrators, shall determine, on the basis set forth in and in accordance with Section 2.7(a),
and only with respect to the Remaining Disagreements so submitted, whether and to what extent, if
any, the Closing Date Net Cash Statement, the Closing Date Net Working Capital Statement, the
Closing Date Net Cash Position and/or the Closing Date Net Working Capital require adjustment.
Newco and Philips shall instruct the Independent Accountant to deliver its written determination to
Newco and Philips no later than thirty (30) days after the Remaining Disagreements are referred to
the Independent Accountant. The Independent Accountant’s determination shall be conclusive and
binding upon Newco and Philips and their respective Affiliates, absent manifest error. The fees and
disbursements of the Independent Accountant shall be borne by Philips and Newco in the proportion
that the aggregate value of those Remaining Disagreements that the Independent Accountant
determines require adjustment bears to the aggregate value of those Remaining Disagreements that
the Independent Accountant determines not to require adjustment. Philips and Newco shall make
readily available to the Independent Accountant all relevant books and records and any work papers
(including those of the Parties’ respective accountants, subject to customary hold-harmless
agreements) relating to the Closing Date Financial Statements and Newco’s Objection and all other
items reasonably requested by the Independent Accountant in connection therewith.

     (d) Cooperation. Newco and the Company shall provide to Philips and its accountants
full access to the books and records of the Company and the Company Subsidiaries and to any other
information, including work papers of its accountants (subject to customary hold harmless
covenants), and to any employees during regular business hours and on reasonable advance notice,
to the extent necessary for Philips to prepare the Closing Date Financial Statements, to respond
to Newco’s Objection and to prepare materials for presentation to the Independent Accountant in
connection with Section 2.7(c). Newco and its accountants shall be provided full access to all
information used by Philips in preparing the Closing Date Financial Statements, including the work
papers of its accountants (subject to customary hold harmless covenants).

     (e) Payment of Adjustment Amount. If the sum (the “Adjustment Amount”) of
(i) the result of the Closing Date Net Cash Position minus the Reference Net Cash Position and
(ii) the result of the Closing Date Net Working Capital minus the Reference Net Working Capital is
a positive number, Newco shall promptly (and in any event within five Business Days) after the
final determination thereof pay to Philips the

- 16 -

 

Adjustment Amount, and, if the Adjustment Amount is a negative number, Philips shall promptly (and
in any event within five Business Days) after the final determination thereof pay to Newco the
absolute value of the Adjustment Amount, in each case, plus interest from the Closing Date to, but
not including, the date of payment at EURIBOR calculated based on (i) the actual number of days
between the Closing Date and the date of payment of the Adjustment Amount, divided by (ii) 365, in
Euros by wire transfer of immediately available funds to an account designated by Philips or Newco,
as the case may be. For purposes of calculating the Closing Date Net Cash Position and the Closing
Date Net Working Capital, any amounts in currencies other than Euros shall be translated into Euros
using the applicable exchange rates prevailing on the Closing Date.

ARTICLE III 

REPRESENTATIONS AND WARRANTIES REGARDING PHILIPS 

     Subject to the exceptions set forth in the Schedules, Philips represents and warrants
to Newco as follows:

     Section 3.1 Corporate Status. Philips is a limited liability company duly
organized and validly existing under the laws of The Netherlands. Each Affiliate of Philips
that is party to an Ancillary Agreement is a limited liability company duly organized,
validly existing and, if applicable, in good standing under the laws of its jurisdiction of
organization.

     Section 3.2 Due Authorization, Execution and Delivery; Enforceability. Philips has
full corporate power and authority to execute and deliver this Agreement and to perform its
obligations thereunder. This Agreement has been duly authorized, executed and delivered by
Philips and constitutes a valid and legally binding agreement of Philips, enforceable in
accordance with its terms, subject, as to enforceability, to bankruptcy, insolvency,
reorganization and similar laws of general applicability relating to or affecting creditors’
rights and to general equity principles. Philips and each Affiliate of Philips has full corporate
power and authority to execute and deliver each Ancillary Agreement to which it is a party and to
perform its obligations thereunder. Each Ancillary Agreement to which Philips or an Affiliate of
Philips is a party has been duly authorized, executed and delivered by Philips or such Affiliate,
as the case may be, and constitutes a valid and legally binding agreement of Philips or such
Affiliate, enforceable in accordance with its terms, subject, as to enforceability, to bankruptcy,
insolvency, reorganization and similar laws of general applicability relating to or affecting
creditors’ rights and to general equity principles.

     Section 3.3 No Conflicts. The execution, delivery and performance by Philips of this
Agreement and the consummation of the Transaction do not and will not, and the execution, delivery
and performance by Philips and each Affiliate of Philips of each Ancillary Agreement to which
Philips or such Affiliate is a party will not (i) violate any provision of the Organizational
Documents of Philips or such Affiliate or (ii) assuming the receipt of all Consents referred to in
Section 3.4, to Philips’ Knowledge, violate or

- 17 -

 

result in a breach of or constitute a default under any Law to which Philips or such Affiliate is
subject, other than violations, breaches or defaults that would not reasonably be expected to
prevent, materially delay or materially impair the ability of Philips or such Affiliate to
consummate the Transaction.

     Section 3.4 Consents. No material Consent of or with any Governmental Authority or
other Person is required to be obtained, made or effected by Philips or any Affiliate of Philips
(excluding the Company and the Company Subsidiaries) in connection with the execution and delivery
of this Agreement by Philips or any Affiliate of Philips (excluding the Company and the Company
Subsidiaries) or the performance of their respective obligations under this Agreement or any
Ancillary Agreement, except for the Antitrust Approvals.

     Section 3.5 Ownership of Company Shares. Philips has good and valid title to the
Company Shares, free and clear of all Encumbrances, and, upon delivery of the Company Shares and
payment therefor pursuant to this Agreement, good and valid title to the Company Shares, free and
clear of all Encumbrances, will pass to Newco.

     Section 3.6 Litigation and Claims. There are no Legal Proceedings pending or, to
Philips’ Knowledge, threatened against Philips or any Affiliate of Philips, that question the
validity of this Agreement or that would reasonably be expected to prevent, materially delay or
materially impair the ability of Philips or any Affiliate of Philips to consummate the Transaction.

     Section 3.7 Philips Equity Commitment Letter. Schedule 3.7 contains a true and
correct copy of the Philips Equity Commitment Letter.

     Section 3.8 Finders’ Fees. Except for Morgan Stanley & Co International Ltd., whose
fees will be borne by Philips, and except for fees and commissions to be paid by the Company to the
Financing Banks in connection with the Debt Financing, there is no investment banker, broker,
finder or other intermediary that has been retained by or is authorized to act on behalf of
Philips, the Company or any Company Subsidiary who might be entitled to any fee or commission from
Philips, the Company or any Company Subsidiary in connection with the Transaction.

ARTICLE IV 

REPRESENTATIONS AND WARRANTIES REGARDING THE COMPANY 

     Subject (other than as to the representations and warranties set out in Section 4.8, Section
4.9, Section 4.14 and Section 4.15) to exceptions set forth in the Due Diligence Information, the
Schedules or the Exhibits, each of Philips and the Company represents and warrants to Newco as
follows, provided that all such representations and warranties that pertain to or are made with
respect to any Company Subsidiary not yet incorporated as of the date hereof are made as of the
Closing and not as of the date hereof:

- 18 -

 

     Section 4.1 Corporate Status.

     (a) Organization. Schedule 4.1(a) lists all of the Company Subsidiaries, their
respective jurisdictions of organization and the number and percentage of the shares of capital
stock or other equity securities of each Company Subsidiary that will be owned directly or
indirectly by the Company as of the Closing. The Company is, and each Company Subsidiary as of the
Closing will be, duly organized and validly existing under the laws of its respective jurisdiction
of organization, has or will have all requisite power and authority to own or lease and operate
its properties and assets and to carry on the Business (or, in the case of a Company Subsidiary,
the relevant portion thereof) as presently conducted or as contemplated in the Disentanglement
Schedule, and is or at the Closing Date will be duly qualified or licensed to do business and, if
applicable, is or at the Closing Date will be in good standing in each jurisdiction where the
ownership, lease or operation of its assets or properties or conduct of its business requires or
will require such qualification or license, and neither the Company nor any Company Subsidiary has
filed for or been granted a moratorium of payment or has been declared bankrupt, is insolvent or
unable to pay its debts within the meaning of applicable insolvency Laws, except where the failure
to be so organized, qualified, licensed or in good standing, or to have such power or authority
has not had or resulted and would not be reasonably likely to have or result in a Philips Material
Adverse Effect.

     (b) Organizational Documents. Schedule 4.1(b) sets forth complete and correct copies
of the Organizational Documents of the Company, as they will be in effect as of the Closing.
Philips prior to the Closing will furnish to Newco complete and correct copies of the
Organizational Documents of each Company Subsidiary, in each case as then in effect. All such
Organizational Documents will be in full force and effect as of the Closing, and no other
organizational documents will be applicable to or binding upon the Company or any Company
Subsidiary.

     Section 4.2 Due Authorization, Execution and Delivery; Enforceability. The Company
has full corporate power and authority to execute and deliver this Agreement and to perform its
obligations under this Agreement. This Agreement has been duly authorized, executed and delivered
by the Company and constitutes a valid and legally binding agreement of the Company, enforceable in
accordance with its terms, subject, as to enforceability, to bankruptcy, insolvency, reorganization
and similar laws of general applicability relating to or affecting creditors’ rights and to general
equity principles. The Company and each Company Subsidiary has or prior to the Closing will have
full corporate power and authority to execute and deliver each Ancillary Agreement to which it is a
party and to perform its obligations thereunder. Each Ancillary Agreement to which the Company or
a Company Subsidiary is a party has been duly authorized, executed and delivered by the Company or
such Company Subsidiary, as the case may be, and constitutes a valid and legally binding agreement
of the Company or such Company Subsidiary, enforceable in accordance with its terms, subject, as to
enforceability, to bankruptcy, insolvency, reorganization and similar laws of general applicability
relating to or affecting creditors’ rights and to general equity principles.

- 19 -

 

     Section 4.3 No Conflicts. The execution, delivery and performance by the Company of
this Agreement and the consummation of the Transaction do not and will not, and the execution,
delivery and performance by the Company and each Company Subsidiary of each Ancillary Agreement to
which the Company or such Company Subsidiary is a party do not and will not (i) violate any
provision of the Organizational Documents of the Company or such Company Subsidiary and (ii)
assuming the receipt of all Consents referred to in Section 4.4, to the Knowledge of Philips or the
Company, violate or result in a breach of or constitute a default under any Law to which the
Company or such Company Subsidiary, is subject, other than violations, breaches or defaults that
would not reasonably be expected to prevent, materially delay or materially impair the ability of
the Company or such Company Subsidiary to consummate the Transaction.

     Section 4.4 Consents. No material Consent of or with any Governmental Authority or
other Person is required to be obtained, made or effected by the Company or any Company Subsidiary
in connection with the execution and delivery of this Agreement or any Ancillary Agreement by the
Company or any Company Subsidiary or the performance of their respective obligations under this
Agreement or any Ancillary Agreement, except for the Antitrust Approvals.

     Section 4.5 Capitalization.

     (a) The Company. As of the Closing, the authorized capital stock of the Company will
consist of 40 shares, par value €455 per share, of which 40 shares, which constitute the Company
Shares, will be issued and outstanding. The Company Shares will constitute the only issued and
outstanding shares of capital stock of the Company, will have been duly and validly authorized and
issued and will be fully paid and nonassessable. There will be no issued and outstanding
securities, rights or obligations that are convertible into, exchangeable for, or exercisable to
acquire, any capital stock or other equity securities of the Company.

     (b) Company Subsidiaries. All issued and outstanding shares of capital stock or other
equity securities of the Company Subsidiaries as of the Closing will have been duly and validly
authorized and issued and will be fully paid and nonassessable, and each of the Persons who will
own such shares or other securities will have good and valid title to the shares or other
securities so owned by it, free and clear of all Encumbrances. All of the outstanding shares of
capital stock or other equity interests of each Company Subsidiary indicated on Schedule 4.1(a) as
being owned, directly or indirectly, by the Company (the term “Company Subsidiary” for purposes of
this paragraph and the next succeeding paragraph only to include each of Sunext Technology Co.
Ltd., Beijing T3G Technology Company Limited and Advanced Semiconductor Manufacturing Corporation
Limited) as of the Closing will be owned, directly or indirectly, by the Company. As of the Closing
there will be no issued and outstanding securities, rights or obligations which are or will be
convertible into, exchangeable for, or exercisable to acquire, any capital stock or other equity
securities of any Company Subsidiary.

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     (c) Agreements with Respect to Company Securities. As of the Closing there will be no,
and neither the Company nor any Company Subsidiary will be bound by or subject to any (i)
preemptive or other outstanding rights, subscriptions, options, warrants, conversion, put, call,
exchange or other rights, agreements, commitments, arrangements or understandings of any kind
pursuant to which the Company or any Company Subsidiary, contingently or otherwise, will be or may
become obligated to offer, issue, sell, purchase, return or redeem, or cause to be offered, issued,
sold, purchased, returned or redeemed, any Company Securities, (ii) stockholder agreements, voting
trusts, proxies or other agreements or understandings to which the Company or any Company
Subsidiary will be a party or by which the Company or any Company Subsidiary will be bound relating
to the holding, voting, sale, purchase, redemption or other acquisition of Company Securities or
(iii) agreements, commitments, arrangements, understandings or other obligations to declare, make
or pay any dividends or distributions, whether current or accumulated, or due or payable, on any
Company Securities. As of the Closing, neither the Company nor any Company Subsidiary will be, or
will be obligated to become, a party to any Contract for the sale of or will be otherwise obligated
to sell, transfer or otherwise dispose of any Company Securities.

     (d) No Equity Interests or Other Outstanding Investment Obligations. Except with
respect to the ownership of capital stock of the Company Subsidiaries and the minority interests
listed on Schedule 4.5(d), the Company and the Company Subsidiaries as of the Closing will not own,
directly or indirectly, beneficially or of record, any capital stock of or other equity or voting
securities or interests in any other Person. The Company directly or indirectly has good and valid
title to all shares of capital stock or other equity securities of the entities listed on Schedule
4.5(d) held directly or indirectly by the Company. Except as contemplated by the Disentanglement
Schedule or as may be incurred in the Ordinary Course of Business, as of the Closing there will be
no outstanding obligations of the Company or any Company Subsidiary to make any investment in or
provide funds (whether in the form of a loan, capital contribution or otherwise), and neither the
Company nor any Company Subsidiary as of the Closing will have outstanding any such investment or
provision of funds, to any other Person. No Person as of the Closing will be in default with
respect to such Person’s obligation to repay any loan to the Company or any Company Subsidiary.
Neither the Company nor any Company Subsidiary as of the Closing will have outstanding any bonds,
debentures, notes or other obligations the holders of which have the right to vote (or which are
convertible into or exercisable for securities having the right to vote) with the shareholders of
the Company or any Company Subsidiary on any matter.

     Section 4.6 Financial Statements. Set forth in Schedule 4.6 is a copy of (a) the
audited combined statement of net operating capital of the Business at December 31, 2005 (the
“Audited Net Operating Capital Statement”) and (b) the audited combined statement of
earnings before interest and tax for the year ended December 31, 2005 (the “Audited EBIT
Statement” and, together with the Audited Net Operating Capital Statement, the “Audited
Financial Statements”). Except as described in the notes thereto, the Audited Financial
Statements have been specially prepared for purposes of this

- 21 -

 

Agreement and present fairly, in all material respects, the net operating capital of the
Business as of December 31, 2005 and the earnings before interest and tax of the Business for
the year ended December 31, 2005, in all cases in conformity with GAAP.

     Section 4.7 Events Subsequent to Financial Statements. Since December 31, 2005 and
other than in connection with the Transaction and any alternative options that were considered
(none of which have actually been implemented) by Philips for the disposal of the Business in an
initial public offering or a negotiated transaction to one or more buyers and other than the Debt
Financing arrangements referred to herein, (a) the Business has been conducted in the Ordinary
Course consistent with past practice and (b) there has been no change, development or effect or
combination of changes, developments or effects that have had or resulted in or would be reasonably
likely to have or result in a Philips Material Adverse Effect, taking into account Philips’
announcements of its intention to sell, and the fact that it is selling, the Company. Since
December 31, 2005, neither the Company nor any Company Subsidiary has declared, set aside or paid
any dividends or distributions on, or made any other distributions in respect of, any Company
Securities (other than, in each case, cash dividends or distributions by the Company or a Company
Subsidiary to Philips or its Subsidiaries).

     Section 4.8 Tax Matters. Except as have not had or resulted and would not be
reasonably likely to have or result in a Philips Material Adverse Effect:

     (a) All Tax Returns that are required to be filed on or before the Closing Date by or with
respect to the Company or any Company Subsidiary have been or will be timely filed on or before the
Closing Date, and all amounts shown to be due and owing thereon have been or will have been duly
and timely paid or adequately provided for as of the Closing Date.

     (b) All Taxes which the Company or any Company Subsidiary have been required to collect
or withhold have been duly collected or withheld and, to the extent required when due, have
been or shall be duly and timely paid to the proper Taxing Authority (whether or not shown to
be due and payable on any Tax Return).

     (c) There is no lien for Taxes upon any of the Assets of the Company or any Company
Subsidiary nor, to the Knowledge of Philips or the Company, is any Taxing Authority in the process
of imposing any lien for Taxes on any of the Assets of the Company or any Company Subsidiary,
other than liens for Taxes that are not yet due and payable or for Taxes the validity or amount of
which is being contested by Philips, the Company or any Company Subsidiary in good faith by
appropriate action.

     (d) No issues that have been raised by a Taxing Authority in connection with any examination
of the Tax Returns referred to in paragraph (a) of this Section 4.8 are currently pending, and all
deficiencies asserted or assessments made, if any, as a result of such examinations have been paid
in full, unless the validity or amount thereof is being contested by Philips or one of its
Affiliates in good faith by appropriate action.

- 22 -

 

     (e) None of the Company or any Company Subsidiary is a party to, or otherwise bound by or
subject to, any Tax sharing, allocation or indemnification or similar agreement, provision or
arrangement (whether or not written) pursuant to which it will have any obligation to make any
payments to any Person after the Closing.

     Section 4.9 Litigation. (a) There are no Legal Proceedings pending, or to the
Knowledge of Philips or the Company threatened, against or relating to the Business, other than
where the amount claimed against or in relation to the Business does not exceed €25 million.

     (b) There are no Legal Proceedings pending or, to the knowledge of Philips or the Company
threatened, against or relating to the Business asserting claims in relation to the red phosphorus
molding compound supplied to the Business by Sumitomo Corporation (or any of its Affiliates, agents
or intermediaries) as raised by the Company X Claims.

     Section 4.10 Compliance with Laws. The Business has been for the period beginning
January 1, 2005 and currently is being conducted in compliance with all applicable Laws, other
than failures to comply that have not had or resulted in and would not be reasonably likely to
have or result in a Philips Material Adverse Effect and (b) no investigation by any Governmental
Authority with respect to the Business is pending or, to the Knowledge of Philips or the Company,
threatened, other than those the outcome of which have not had or resulted in and would not be
reasonably likely to have or result in a Philips Material Adverse Effect and (c) the Business has
all Governmental Authorizations necessary for the conduct of the Business as currently conducted,
other than those the absence of which have not had or resulted in and would not be reasonably like
to have or result in a Philips Material Adverse Effect; it being understood that nothing in this
representation is intended to address any compliance issue that is specifically addressed by any
other representation or warranty set forth in this Agreement.

     Section 4.11 Employee Benefits. Except as have not had or resulted in and would
not be reasonably likely to have or result in a Philips Material Adverse Effect:

     (a) All material Benefit Plans have been disclosed to Newco in the Virtual Data Room.

          (i) All benefit and compensation plans, contracts, policies, agreements or
arrangements maintained for the benefit of the Employees including plans providing
benefits on retirement, early retirement, death, termination of employment (whether
voluntary or not), or during periods of sickness or disablement, or any welfare,
medical, stock or stock-related award plans, including “jubilee” benefits and
retirement and termination indemnity arrangements (such plans, contracts, agreements,
policies and arrangements hereinafter being referred to as “Benefit Plans”)
have been administered in

- 23 -

 

accordance with their terms and are in compliance with applicable Laws and contracts. To
the Knowledge of Philips or the Company and except as set forth in the Disentanglement
Schedule, no proposal has been announced to establish any new material Benefit Plan that
would result in an increase in the liability for employment or other benefit obligations
with respect to the Employees. All required filings for all Benefit Plans have been made
on time and with the appropriate Governmental Authority. As of the date hereof, there is
no pending or, to the Knowledge of Philips or the Company, threatened material litigation
relating to Benefit Plans.

          (ii) With respect to the Employees, the Company (A) is in compliance with all
applicable Laws respecting employment, employment practices, terms and conditions of
employment, occupational health, safety, wages and hours, (B) has withheld all amounts
required by applicable Laws, collective bargaining agreements or the Benefit Plans to be
withheld from the wages, salaries or other payments to the Employees and former employees
in the Business and (C) is not liable for any payment to any trust or other fund or to any
Governmental Authority with respect to unemployment compensation benefits, workers
compensation, social security or other benefits for Employees or former employees in the
Business for any amounts other than payments not yet due, in each case under any applicable
provisions of Benefit Plans and any applicable Laws.

          (iii) All contributions required to be made to any Benefit Plan in respect of the
period prior to the date of this Agreement have been timely made.

     (b) Except as may be provided under the terms of the Benefit Plans or the Laws of a
Governmental Authority or as may be contemplated by this Agreement, the execution of this
Agreement and the consummation of the transactions contemplated hereby will not alone or together
with a related event (i) entitle any of the Employees, to severance pay or any increase in
severance pay by the Company or the Company Subsidiaries upon any termination of employment after
the date hereof or (ii) other than as expressly provided in this Agreement, accelerate the time of
payment or vesting, or require any payment or funding (through a grantor trust or otherwise) of
compensation or benefits under, or increase the amount payable under, any of the Benefit Plans in
respect of any Employee.

     (c) With respect to the Employees, all social security payments, including payments to any
public pension scheme, compulsory retirement insurance, unemployment insurance, compulsory long
term care insurance, compulsory occupational disability insurance, and compulsory health and safety
insurance required to be made have been timely and properly made.

     Section 4.12 Labor. (a) Neither the Company nor any Company Subsidiary is or as of
the Closing will be a party to or bound by any material labor agreement, union

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contract or collective bargaining agreement other than omnibus agreements covering substantially
all employees in a particular jurisdiction pursuant to the Laws or customary practice of that
jurisdiction respecting the Employees.

     (b) The Company and each Company Subsidiary as of the Closing will be in compliance in all
material respects with all labor Laws applicable to the Business and the Employees, and are not
engaged in any unfair labor practices, as defined in the National Labor Relations Act or other Law
applicable to the Employees.

     (c) Except as has not had or resulted in and would not be reasonably likely to have or result
in a Philips Material Adverse Effect, there is no pending, or to the Knowledge of Philips or the
Company, threatened strike, walkout or other work stoppage or any union organizing effort by any of
the Employees.

     Section 4.13 Real Property. (a) Schedule 4.13(a) lists all material real property
which is or as of the Closing will be owned by the Company and the Company Subsidiaries (the
“Owned Real Property”). Except as has not had or resulted in and would not be reasonably
likely to have or result in a Philips Material Adverse Effect, the Company or a Company Subsidiary
has or as of the Closing will have good and marketable title to, and is or will be the record owner
of, the Owned Real Property.

     (b) Schedule 4.13(b) lists all material real property leases and subleases which are or as of
the Closing will be held by the Company and the Company Subsidiaries (the “Leased Real
Property”) and any and all material ancillary documents pertaining thereto to which the Company
or any Company Subsidiary is or will be a party or is or will be bound (the “Leases”).
Except as has not had or resulted in and would not be reasonably likely to have or result in a
Philips Material Adverse Effect, each of the Leases (including any option to purchase contained
therein) is or as of the Closing will be valid and legally binding and, to the Knowledge of Philips
or the Company, is or will be enforceable against the landlord which is party thereto in accordance
with its terms, and there is or will exist no material default or event of default (or any event
that with notice or lapse of time or both would become a material default or event of default) on
the part of the Company or any Company Subsidiary under any such Lease.

     (c) The ownership, occupancy, use and operation of the Owned Real Property and the Leased Real
Property complies in all material respects with all Laws and Governmental Authorizations, except
for failures to comply that have not had or resulted in or would not be reasonably likely to have
or result in a Philips Material Adverse Effect, and does not violate in any material respect any
instrument of record or agreement affecting such property.

     (d) There are no pending, or to the Knowledge of Philips or the Company threatened,
appropriation, condemnation, eminent domain or like proceedings relating to the Owned Real
Property or the Leased Real Property. To the Knowledge of Philips and the Company, there is no
Encumbrance affecting any Owned Real Property or Leased

- 25 -

 

Real Property that materially interferes with its current use or the conduct of the Business as
currently conducted.

     (e) None of the Owned Real Property or the Leased Real Property has suffered any material
damage by fire or other casualty which has not been or will not prior to the Closing have been
repaired and restored in all material respects, except for damage that would not, individually or
in the aggregate, materially impair the conduct of the Business.

     Section 4.14 Intellectual Property. Except as stipulated in the Intellectual
Property Transfer and License Agreement (other than Section 11.1 thereof):

     (a) As of the Closing, Philips will have assigned to the Company all of the Registered
Intellectual Property, free and clear of all Encumbrances (excluding licenses granted to Third
Parties prior to the date hereof and contractual obligations related to funding by Governmental
Authorities or technology collaborations). To the Knowledge of Philips or the Company, the
Registered Intellectual Property is valid, subsisting and enforceable in all material respects,
and the Intellectual Property is not subject to any outstanding order, judgment, decree or
agreement materially and adversely affecting the use thereof by the Company or any Company
Subsidiary or their rights thereto. The Company and the Company Subsidiaries have or as of the
Closing will have the right to use pursuant to license, sublicense, agreement or permission, all
Philips Intellectual Property used in the Business in all material respects as presently
conducted.

     (b) To the Knowledge of Philips or the Company, neither the Business nor the Company or any
Company Subsidiary has or as of the Closing will have infringed or otherwise violated any
Intellectual Property of any third party in any material respect, nor have either of them or
Philips or any Affiliate of Philips received during the three years prior to the Closing any
material claims of third parties to that effect with respect to the Business, the Company or any
Company Subsidiary.

     (c) There is no material litigation, opposition, cancellation, proceeding, objection or
claim pending, asserted or threatened concerning the ownership, validity, registerability,
enforceability, infringement, use or licensed right to use any Registered Intellectual Property.

     Section 4.15 Environmental Matters. Except as has not had or resulted in and would
not be reasonably likely to have or result in a Philips Material Adverse Effect:

     (a) To the Knowledge of Philips or the Company, the Business is in compliance with
all applicable Environmental Laws.

     (b) To the Knowledge of Philips or the Company, the Business as of the Closing will
have all permits, licenses, registrations, identification numbers,

- 26 -

 

authorizations and approvals required under Environmental Laws for the operation of the Business
as presently conducted.

     (c) To the Knowledge of Philips or the Company, no notices, demands, claims, letters or
requests for information, relating to any material violation or alleged material violation of, or
any material Liability under, any Environmental Law applicable to the Business have been received
by any Person during the past three years, except for matters that have been resolved or are no
longer outstanding.

     (d) There are no writs, injunctions, decrees, orders or judgments outstanding, or any
actions, suits, proceedings or investigations pending or, to the Knowledge of Philips or the
Company, threatened, relating to compliance by the Business with or Liability under any applicable
Environmental Law, except for matters that have been resolved or are no longer outstanding.

     (e) Notwithstanding any of the other representations in Article III, the representations in
this Section 4.15 constitute the sole representations and warranties relating to any Environmental
Law concerning the Business, the Owned Real Property or the Leased Real Property.

     Section 4.16 Contracts. To the Knowledge of Philips or the Company, all of the
contracts listed on Schedule 4.16 (the “Material Contracts”) are in full force and effect
and are enforceable against each party thereto in accordance with the express terms thereof. There
does not exist under any Material Contract any material violation, breach or event of default, or
alleged violation, breach or event of default, or event or condition that, following the Closing
and after notice or lapse of time or both, would constitute a material violation, breach or event
of default thereunder on the part of the Company or, to the Knowledge of Philips or the Company,
any other party thereto, except as set forth in Schedule 4.16. There are no material disputes
pending or threatened under any Material Contract.

     Section 4.17 Territorial Restrictions. Neither of the Company nor any Company
Subsidiary is or as of the Closing will be restricted by any agreement with any Person from
carrying on the Business anywhere in the world or from expanding the Business in any way or
entering into any new businesses, except for such restrictions that would not be material to the
Business or that would not apply to the Business or Newco following the Closing.

     Section 4.18 Insurance. Schedule 4.18 lists all material insurance policies
covering the properties, assets, employees and operations of the Company and the Company
Subsidiaries (including policies providing property, casualty, liability, and workers’
compensation coverage). All of such policies or renewals thereof are in full force and effect
and to the Knowledge of Philips or the Company, except as set forth in Schedule 4.18 or in the
Disentanglement Schedule, will continue in full force and effect with respect to the properties,
assets, employees and operations of the Company and the

- 27 -

 

Company Subsidiaries immediately following the Closing. For the avoidance of doubt, certain
material insurance policies covering employees are set forth in Schedule 4.11(a) and not in
Schedule 4.18.

     Section 4.19 Sufficiency of Assets. Except as otherwise set forth in this Agreement
and except for the assets, properties and rights listed in Schedule 4.19, the assets, properties
and rights of the Company and the Company Subsidiaries as of the Closing, when taken together with
the services to be provided (and the assets, properties and rights of Philips and its Affiliates to
be used in providing such services) and the assets, properties and rights to be leased or licensed
by Philips and its Affiliates under the Ancillary Agreements and the benefits to be made available
to the Company or the relevant Company Subsidiary pursuant to Section 6.11, constitute all the
assets, property and rights necessary for the Company and the Company Subsidiaries to conduct the
Business in all material respects as conducted on the date hereof.

     Section 4.20 Debt Financing Commitment. The Company has received from the Financing
Banks a signed commitment letter (the “Debt Commitment Letter”), a true and correct copy of which
is set forth in Schedule 4.20.

     Section 4.21 No Other Representations or Warranties. Except for the representations
and warranties contained in Article III and this Article IV, neither Philips nor the Company nor
any other Person makes any other express or implied representation or warranty on behalf of Philips
or the Company.

ARTICLE V 

REPRESENTATIONS AND WARRANTIES OF NEWCO 

     Subject to exceptions set forth in the Schedules, Newco represents and warrants to Philips as
follows:

     Section 5.1 Corporate Status. Newco is a limited liability company duly
organized and validly existing under the laws of The Netherlands.

     Section 5.2 Due Authorization, Execution and Delivery; Enforceability. Newco has
full corporate power and authority to execute and deliver this Agreement and to perform its
obligations under this Agreement. This Agreement has been duly authorized, executed and delivered
by Newco and constitutes a valid and legally binding agreement of Newco, enforceable in accordance
with its terms, subject, as to enforceability, to bankruptcy, insolvency, reorganization and
similar laws of general applicability relating to or affecting creditors’ rights and to general
equity principles.

     Section 5.3 No Conflicts. The execution, delivery and performance by Newco of this
Agreement and the consummation of the Transaction do not and will not (i) violate any provision of
the Organizational Documents of Newco or (ii) assuming the receipt of all Consents referred to in
Section 5.4, to Newco’s Knowledge, violate or result

- 28 -

 

in a breach of or constitute a default under any Law to which Newco is subject, other than
violations, breaches or defaults that would not reasonably be expected to prevent, materially delay
or materially impair the ability of Newco to consummate the Transaction.

     Section 5.4 Consents. No material Consent of or with any Governmental Authority or
other Person is required to be obtained, made or effected by Newco in connection with the
execution and delivery of this Agreement by Newco or the performance of its obligations under this
Agreement, except for the Antitrust Approvals.

     Section 5.5 Litigation and Claims. There are no Legal Proceedings pending or, to
Newco’s knowledge, threatened against Newco, that question the validity of this Agreement or that
would reasonably be expected to prevent, materially delay or materially impair the ability of Newco
to consummate the Transaction.

     Section 5.6 Financial Sophistication. Newco will serve as the vehicle pursuant to
which the Investors will acquire an indirect interest in the Company. Newco has received
assurances from each of the Investors that: (a) the Investor has such knowledge and experience in
financial and investment matters and in such other business matters that the Investor is capable of
evaluating the merits and risks of the investment contemplated herein and in the Subscription
Agreement, (b) the Investor, together with its advisors, has been given the opportunity to perform
due diligence and to receive such information and materials as the Investor may reasonably have
requested with respect to the Company in order to evaluate the merits and risks of such investment
and (c) the Investor is not relying on Philips or its advisors with respect to the economic,
financial or tax considerations involved in such investment.

     Section 5.7 Finders’ Fees. There is no investment banker, broker, finder or other
intermediary that has been retained by or is authorized to act on behalf of Newco who might be
entitled to any fee or commission from Newco in connection with the Transaction.

     Section 5.8 Investor Equity Commitment Letters. Schedule 5.8 contains true and
correct copies of the Investor Equity Commitment Letters.

     Section 5.9 No Other Representations or Warranties. Except for the representations
and warranties contained in this Article V, neither Newco nor any other Person makes any other
express or implied representation or warranty on behalf of Newco.

ARTICLE VI

COVENANTS 

     Section 6.1 Access and Information. From the date hereof until the Closing,
subject to reasonable rules and regulations of Philips and any applicable Laws, Philips

- 29 -

 

shall (a) afford Newco and its representatives (including representatives of entities providing or
arranging financing for Newco) access, during regular business hours and upon reasonable advance
notice, to any information and documents reasonably requested by Newco primarily relating to the
Business, (b) furnish, or cause to be furnished, to Newco any financial and operating data and
other information about the Business as Newco from time to time reasonably requests and (c)
instruct relevant personnel, and its counsel, accountants and financial advisors to cooperate with
Newco in its investigation of the Business; provided, however, that in no event shall Newco have
access to any information that (y) based on advice of Philips’ counsel, would create any potential
Liability under applicable Laws, including Antitrust Laws, or would destroy any legal privilege or
(z) in the reasonable judgment of Philips, would (i) result in the disclosure of any trade secrets
of third parties or (ii) violate any obligation of Philips, any Affiliate of Philips, including the
Company or any Company Subsidiary, with respect to confidentiality so long as, with respect to
confidentiality, Philips has made reasonable efforts to obtain a waiver regarding the possible
disclosure from the third party to whom it owes an obligation of confidentiality; and it being
further understood that Newco shall reimburse Philips promptly for any expenses it incurs in
complying with any such request by or on behalf of Newco. All requests for information made
pursuant to this section shall be directed to an executive officer of Philips or such Person or
Persons as may be designated by Philips. Following the Closing, upon the request of the other
Party, Philips and Newco shall, to the extent permitted by Law and confidentiality obligations
existing as of the Closing Date, grant to the other Party and its representatives during regular
business hours and subject to reasonable rules and regulations of the granting Party, the right, at
the expense of the non-granting Party, to inspect and copy the books, records and other documents
in the granting Party’s possession pertaining to the operation of the Business prior to the Closing
(including books of account, records, files, invoices, correspondence and memoranda, customer and
supplier lists, data, specifications, insurance policies, operating history information and
inventory records). In no event shall either Party have access to the Tax Returns of the other
Party.

     Section 6.2 Conduct of the Business. (a) During the period from the date hereof to
the Closing, except as otherwise contemplated by this Agreement, including the Disentanglement
Schedule, or as Newco otherwise agrees in writing in advance, Philips shall, and to the extent
applicable shall cause the Company and the Company Subsidiaries to, conduct the Business in the
Ordinary Course and use commercially reasonable efforts to preserve intact the Business and its
relationship with customers, suppliers, creditors and employees.

     (b) During the period from the date hereof to the Closing, except as otherwise contemplated by
this Agreement, including the Disentanglement Schedule, or as set forth in Schedule 6.2(b) or as
Newco shall otherwise consent (which consent shall not be unreasonably withheld), Philips shall not
take any of the following actions with respect to the Business and, to the extent applicable, shall
cause the Company and the Company Subsidiaries not to:

- 30 -

 

          (i) (A) incur any additional Indebtedness, except in the Ordinary Course of Business,
or issue any debt securities or assume, guarantee or endorse any material obligations of
any other Person, except pursuant to the Debt Commitment Letter, or (B) make any material
loans, advances or capital contributions to, or investments in, any other Person (other
than customary loans or advances to employees in amounts not material to the maker of such
loan or advance), except for the payment by the Company of the Net Debt Financing Amount
to Philips in accordance with Section 6.10(c);

          (ii) acquire (by merger, consolidation or acquisition of stock or assets) any
corporation, partnership or other business organization or division thereof or any equity
interest therein, except that the Company may, directly or indirectly, acquire or agree to
acquire additional shares of Systems on Silicon Manufacturing Co. Pte. Ltd.;

          (iii) (A) sell, assign, lease, transfer, license, or otherwise dispose of, or extend
or exercise any option to sell, assign, lease, transfer, license, or otherwise dispose of,
any Assets, other than in the Ordinary Course of Business or (B) mortgage or pledge any
Assets, other than in the Ordinary Course of Business;

          (iv) terminate or materially extend or materially modify any Material Contract;

          (v) enter into any contract, arrangement or commitment or amend any contract,
arrangement or commitment, other than in the Ordinary Course of Business;

          (vi) materially increase, amend or grant any employee benefits in any material
manner, except in the Ordinary Course of Business;

          (vii) settle any Legal Proceedings or other disputes (A) that would result in
Philips, or to the extent applicable the Company and the Company Subsidiaries, being
enjoined in any respect material to the Transaction or the Business or (B) for an amount,
in the aggregate, exceeding €5 million;

          (viii) accelerate the delivery or sale of products or the incurrence of capital
expenditures, or offer discounts on sale of products or premiums on purchase of raw
materials, except in the Ordinary Course of Business;

          (ix) do any other act which would cause any representation or warranty of Philips in
this Agreement to be or become untrue in any material respect or intentionally omit to
take any action necessary to prevent any such representation or warranty from being untrue
in any material respect at such time; or

- 31 -

 

          (x) authorize or enter into any agreement or commitment with respect to any of the
foregoing.

     Section 6.3 Disentanglement. Philips shall use its commercially reasonable efforts
to complete in all material respects, as soon as reasonably practicable after the date hereof, the
Disentanglement, as set forth in the Disentanglement Schedule and in accordance with the Ancillary
Agreements. Philips shall not, and shall procure that its Subsidiaries shall not, amend the terms
of any of the Ancillary Agreements in a manner materially adverse to Newco, the Company or any
Company Subsidiary without the prior consent of Newco, which consent shall not be unreasonably
withheld. Philips shall periodically inform Newco of the progress being made with respect to the
Disentanglement and provide Newco with such information as it may reasonably request with respect
thereto. The Disentanglement Schedule and related documentation will be finalised in good faith
and on reasonable commercial arm’s length terms to procure the successful separation of the
Company, Company Subsidiaries and the Business from the existing Philips Group, it being
understood that this will not entitle the Parties to require the amendment of items to the extent
agreed prior to the date hereof. The Parties acknowledge and agree that the Disentanglement
Schedule in the form in which it is annexed to this Agreement is the Disentanglement Schedule as
it existed on August 3, 2006 and that such Disentanglement Schedule remains a work in progress.
Since August 3, 2006, several meetings and discussions have taken place between various
representatives of the Parties with a view to finalizing the Disentanglement Schedule and the
Ancillary Agreements. The signing of this Agreement is without prejudice to that process and
ongoing discussions since August 3, 2006.

     Section 6.4 Debt Financing. Philips and the Company shall not make or agree to any
material changes to the terms and conditions of the Debt Financing as set forth in the Debt
Commitment Letter that are adverse to Newco or the Company without the written consent of Newco.

     Section 6.5 Retention of Records. (a) Newco shall retain for a period of five years
after the Closing, or such longer period as may be prescribed by Law, all books, records and other
documents relating to the Business that are at the Company Premises at the Closing and, to the
extent reasonably required by Philips, shall grant Philips, upon reasonable notice, access during
normal office hours to such books, records and other information, including the right to inspect
and take copies at Philips’ expense.

     (b) Philips shall retain for a period of five years after the Closing, or such longer period
as may be prescribed by Law, all books, records and other documents relating to the Business that
are not held at the Company Premises at the Closing and, to the extent reasonably required by
Newco, shall grant Newco, upon reasonable notice, access during normal office hours to such books,
records and other information, including the right to inspect and take copies at Newco’s expense.

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     Section 6.6 Reasonable Best Efforts. Philips and Newco shall cooperate and use their
respective commercially reasonable best efforts to fulfill as promptly as practicable the
conditions precedent to their and the other Party’s obligations under this Agreement, including
securing as promptly as practicable all Consents required hereunder, other than in connection with
the Antitrust Approvals, provided that Philips need not request a Consent from any third party if
such Consent is not material to the Business. To the extent that, as an accommodation to Newco and
with Newco’s prior written consent, Philips incurs costs that Newco otherwise would have to incur
in order to secure any Consent, other than in connection with the Antitrust Approvals, Newco shall
promptly reimburse Philips for any such costs that are invoiced by Philips to Newco.

     Section 6.7 Antitrust. (a) As soon as practicable, and in any event not later
than five (5) Business Days after the date hereof, Newco shall make all filings and submissions
necessary or desirable to obtain the Antitrust Approvals or as otherwise required by the
Antitrust Laws.

     (b) As promptly as practicable following the receipt of a request by a Governmental Authority
for additional information or documentary material in connection with a filing made pursuant to
Section 6.7(a), Newco shall file such additional information or documentary material with such
Governmental Authority.

     (c) Newco shall use its reasonable best efforts to cause the expiration or termination of any
applicable waiting period under any Antitrust Law and the satisfaction (whether explicit or
implicit) of all requirements to obtain the Antitrust Approvals as soon as practicable, including
by agreeing to (i) take any action that may be required in order to obtain an unconditional first
phase clearance (including by agreeing to dispose of any assets or businesses that may be required
by any Governmental Authority pursuant to an Antitrust Law) or (ii) duly and promptly comply with
any condition that any Governmental Authority may impose to clear this Agreement and the
Transaction pursuant to an Antitrust Law.

     (d) Newco shall bear all filing fees and other costs in relating to any filings (including
submissions of additional information or documentary material) made pursuant to this Section
6.7, along with any and all costs, penalties and fines resulting from the failure to make a
filing (including a submission of additional information or documentary material) required in
order to obtain an Antitrust Approval, to the extent such failure is attributable to Newco.

     (e) Philips and Newco shall cooperate with each other and shall furnish to the other Party all
information necessary or desirable in connection with making any filing under any the Antitrust
Laws, and in connection with resolving any investigation or other inquiry by any Governmental
Authority under any of the Antitrust Laws with respect to the Transaction. Each of the Parties
shall promptly inform the other Party of any communication with, and any proposed understanding,
undertaking or agreement with, any Governmental Authority in connection with any such filings or
any such transaction.

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Neither Philips nor Newco shall participate in any meeting or conversation with any Governmental
Authority in connection with of any such filings, investigation or other inquiry without giving the
other Party prior notice of the meeting or conversation (as applicable) and reasonable opportunity
to participate in such meeting or conversation. The Parties will consult and cooperate with one
another in connection with any analyses, appearances, presentations, memoranda, briefs, arguments,
opinions filings, notifications and proposals made or submitted by or on behalf of any Party in
connection with all meetings, actions and proceedings under or relating to the Antitrust Laws,
provided that Newco shall not make any written filing, including submitting any additional
information or documentary material requested by a Governmental Authority in connection with
obtaining the Antitrust Approvals or as otherwise required under the Antitrust Laws, without the
prior written approval of Philips, which approval shall not be unreasonably withheld.

     Section 6.8 Employee Matters. (a) During the period commencing on the Closing Date
and ending on the first anniversary thereof, Newco shall cause the Company and the Company
Subsidiaries to: (i) provide employee benefits that are the same as, or in the aggregate
substantially comparable to, the employee benefits currently provided to the Employees and (ii)
honor, pay, perform and satisfy any and all Liabilities, obligations and responsibilities to or in
respect to each current Employee or former employee in the Business under the terms of each Benefit
Plan or applicable Law and each between the Company and such Employee or former employee, in each
case, as in effect immediately prior to the Closing Date, provided, however, that nothing in this
Agreement shall limit Newco, or the Company or any Company Subsidiary, from exercising after the
Closing any reserved right to amend, modify, suspend or terminate any Benefit Plan or other
employee compensation or benefit arrangement. Newco shall cause each employee benefit plan or
arrangement maintained or contributed to by Newco, the Company or any Company Subsidiary and in
which an Employee participates or will participate to recognize all service of such Employee with
the Company or any Company Subsidiary (to the extent such credit was given by the comparable
Benefit Plan) for purposes of eligibility and vesting (but not for purposes of determining the
amount of benefits or contributions) and, if applicable, to waive any exclusions for preexisting
conditions under applicable group health plans (to the extent such conditions were covered under
the applicable Benefit Plan). For so long as any Employee participates in any Benefit Plan of
Philips or any Affiliate of Philips, Newco shall not, and shall cause the Company and the Company
Subsidiaries not to, take any action that would be reasonably likely to have or result in material
adverse effect on Philips with respect to such Benefit Plan, and Newco shall, and shall cause the
Company and the Company Subsidiaries to, cooperate with Philips in connection with administering
any such Benefit Plan.

     (b) Reference is made to paragraph 8 of the Disentanglement Schedule. To the extent that
defined benefit pension plans and/or termination indemnities of Philips as disclosed by Philips in
the Virtual Data Room are funded externally through a separate Philips pension fund or an insurance
contract between Philips and a pension insurer,

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Philips shall procure a bundled transfer of liabilities to any funding vehicle appointed by Newco
and shall also procure that such transfer will be combined with a transfer of assets which, at the
transfer date, equals the greater of (i) the accumulated benefit obligations (ABO) value of the
transferred liabilities as calculated on the basis of actuarial and economic assumptions
consistently applied by Philips for the purpose of its annual accounts in accordance with the past
accounting methods, policies, practices and procedures of Philips or (ii) the level required to
fund the transferred liabilities (including for the avoidance of doubt the required reserves), in
compliance with applicable regulatory requirements (as determined by the Dutch Central Bank or any
other Governmental Authority supervising such transfers). Such compliance will be determined (i) in
accordance with the valuation principles of the Philips pension fund from which they will be
transferred and (ii) for The Netherlands, based on the assumption that the investment policy of the
funding vehicle appointed by Newco will be equal to the investment policy of the Philips pension
fund in the Netherlands regarding the plan assets of the relevant Benefit Plan at the designated
transfer date (the “Transfer Date”). Philips’ obligation to procure such transfers of assets and
liabilities will only apply if the possibility of such transfer of assets and liabilities is either
approved by the board of trustees of the relevant Philips pension fund or permitted by the relevant
insurance contract and, if and when legally required, to the extent that the particular employees
agree to (i) a transfer of their accrued rights under the conditions as referred to above and (ii)
any other condition as determined by the board of trustees of the relevant pension fund or as
permitted by the terms and conditions of the relevant insurance contract. If and to the extent that
any transfer will be completed after the Transfer Date, the asset transfer will equal the transfer
value as per the Transfer Date plus any interest accrued on that transfer value on the basis of
6-month EURIBOR between the Transfer Date and the date the liabilities actually transfer.

     (c) In addition, the arrangements set out in Schedule 6.8(c) will apply.

     Section 6.9 Tax Matters.

     (a) Preparation and Filing of Tax Returns.

          (i) Philips shall prepare and timely file (including extensions) in proper form with
the appropriate Taxing Authority all income Tax Returns of the Company or a Company
Subsidiary or which include or relate to the Company or the Company Subsidiaries for
Pre-Closing Tax Periods ending on or before the Closing Date. Philips shall timely pay or
shall cause to be timely paid any and all Taxes due with respect to such Tax Returns
allocable to Philips under Section 6.9(b). Philips and its Affiliates shall have the
exclusive authority and obligation to prepare all Tax Returns of the Company and the
Company Subsidiaries or which include the Company or any Company Subsidiary described in
the preceding sentence that are due with respect to any Pre-Closing Tax Period. Such
authority shall include the determination of the manner in which any items of income, gain,
deduction, loss or credit arising out of the income, properties and

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operations of the Company and the Company Subsidiaries shall be reported or disclosed in such Tax
Returns; provided, however, that such Tax Returns shall be prepared by treating items on
such Tax Returns in a manner consistent with past practices with respect to such items,
unless otherwise required by Law. Philips shall provide Newco drafts of such Tax Returns at
least thirty (30) days prior to the due date for the filing of such Tax Returns (including
extensions). At least fifteen (15) days prior to the due date for the filing of such Tax
Returns (including extensions), Newco shall notify Philips in writing of any objections to
any items set forth on such draft Tax Returns. Philips and Newco agree to consult and
resolve in good faith any such objection.

     (ii) Newco shall prepare and file in proper form with the appropriate Taxing Authority
or shall cause the Company or one or more Company Subsidiaries to prepare and file in
proper form with the appropriate Taxing Authority all Tax Returns of the Company or a
Company Subsidiary or which include the Company or any Company Subsidiary for Tax Periods
for which Philips is not responsible pursuant to Section 6.9(a)(i) and shall pay or shall
cause to be paid any and all Taxes due with respect to such Tax Returns. If any portion of
the Taxes due with respect to such Tax Returns is allocable to Philips, and Philips is
liable for such Taxes, under Section 6.9(b), Newco shall provide Philips with written
notice of the amount at least thirty (30) days prior to the date on which the relevant Tax
Return is required to be filed by Newco or payment of such Taxes is otherwise due, and
Philips shall pay such amount to Newco no later than five Business Days before such Taxes
are due and payable. For 60 days after Closing, the requirements of the preceding sentence
shall be applied in a manner that reasonably and in good faith reflects Newco’s ability to
assume the administrative responsibilities described in the preceding two sentences.

     (iii) For purposes of this Agreement, (A) the term “Pre-Closing Tax Period”
means a Tax period or portion thereof that ends on or prior to the Closing Date; if a Tax
period begins on or prior to the Closing Date and ends after the Closing Date, then the
portion of the Tax period that ends on and includes the Closing Date shall constitute a
Pre-Closing Tax Period, (B) the term “Post-Closing Tax Period” means any Tax period
that begins after the Closing Date; if a Tax period begins on or prior to the Closing Date
and ends after the Closing Date, then the portion of the Tax period that begins immediately
after the Closing Date shall constitute a Post-Closing Tax Period and (C) the term
“Straddle Tax Period” means any Tax period that begins before the Closing Date and
ends after the Closing Date.

     (b) Apportionment and Allocation of Taxes. All Taxes and Tax Liabilities with respect
to the income, property or operations of the Company or the Company Subsidiaries that relate to a
Straddle Tax Period shall be apportioned to the Pre-Closing Tax Period as follows: (i) in the case
of Taxes that are either (A) based upon or related to income or receipts, capital or net worth or
(B) imposed in connection with any sale or

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other transfer or assignment of property (real or personal, tangible or intangible) (other than
conveyances pursuant to this Agreement, as provided under Section 6.9(g)), such Taxes shall be
deemed equal to the amount which would be payable if the Tax year ended with the Closing Date
(provided, however, that exemptions, allowances or deductions that are calculated on an annual
basis, such as the deduction for depreciation, shall be apportioned on a time basis) and (ii) in
the case of Taxes imposed on a periodic basis other than those described in clause (i), including
property Taxes and similar ad valorem obligations, such Taxes shall be deemed to be the amount of
such Taxes for the entire Straddle Tax Period (or, in the case of such Taxes determined on an
arrears basis, the amount of such Taxes for the immediately preceding period), multiplied by a
fraction the numerator of which is the number of days in the period ending on the Closing Date and
the denominator of which is the number of days in the entire period. Subject to Section 6.9(f), (i)
Philips shall be liable for all Taxes of the Company and any Company Subsidiary that are
attributable to any Pre-Closing Tax Period, whether shown on any original Tax Return or amended Tax
Return for the period therein, if such Taxes exceed, in the aggregate, €10 million (and then for
the entire such amount and not just the amount in excess of €10 million) and are not
attributable to a timing item as defined in Section 6.9(f)(iii) and (ii) Newco shall be liable for
all Taxes that are attributable to any Post-Closing Tax Period; provided, however, Philips shall
pay or cause to be paid any Tax or Tax liability apportioned or allocated to Philips pursuant to
the preceding sentence that is due to be paid with respect to any original Tax Return filed after
the date of this Agreement. Philips shall pay Newco an amount equal to any amount of Tax for which
Philips is liable pursuant to this Section 6.9(b) no later than three Business Days before such
Taxes are due and payable.

     (c) Refunds. Newco shall pay or cause to be paid to Philips any refunds of Taxes
attributable to any Tax Returns filed prior to the date of this Agreement with respect to any
Pre-Closing Tax Period that exceed the amounts reserved for such refunds, net of any costs
attributable to the receipt of such refund, within thirty (30) days after the receipt of such
refund. All refunds of Taxes that (i) do not exceed the amounts reserved for refunds or (ii) are
attributable to any Tax Returns filed on or after the date of this Agreement or to any Post-Closing
Tax Period, and that are received by Newco, the Company or any Company Subsidiary shall be for the
benefit of Newco.

     (d) Cooperation; Audits. In connection with the preparation of Tax Returns, audit
examinations, and any administrative or judicial proceedings relating to the Taxes, Newco, the
Company and the Company Subsidiaries, on the one hand, and Philips, on the other hand, shall
cooperate fully with each other, including the furnishing or making available during normal
business hours of records, personnel (as reasonably required and at no cost to the other Party),
books of account, powers of attorney or other materials necessary or helpful for the preparation of
such Tax Returns, the conduct of audit examinations or the defense of claims by Taxing Authorities
as to the imposition of Taxes. Philips, Newco, the Company and the Company Subsidiaries shall
retain all Tax Returns, schedules and work papers and all material records or other documents
relating to all Taxes of the Company and the Company Subsidiaries for the Tax period first

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ending after the Closing Date and for all prior Tax periods until the later of (i) the expiration
of the statute of limitations of the Tax periods to which such Tax Returns and other documents
relate, including any extension or (ii) seven years following the due date for such Tax Returns,
and each of Philips and Newco shall maintain such Tax Returns, schedules, work papers, records and
documents in the same manner and with the same care it uses in maintaining its Tax Returns,
schedules, work papers, records and documents. Philips, on the one hand, and each of Newco, the
Company and the Company Subsidiaries, on the other hand, shall give the other Party reasonable
written notice prior to destroying or discarding any such books or records and, if the other Party
so requests, the other Party shall take possession of such books and records prior to the
destruction thereof. Any information obtained under this Section 6.9(d) shall be kept confidential,
except as may be otherwise necessary in connection with the filing of Tax Returns or claims for
refund or in conducting an audit or other proceeding.

     (e) Controversies. Newco shall notify Philips in writing, and in reasonable detail
(taking into account the information then available), within thirty (30) days of the receipt by
Newco or any Affiliate of Newco (including the Company or any Company Subsidiary after the Closing
Date) of written notice of any inquiries, claims, assessments, audits or similar events with
respect to Taxes relating to a Pre-Closing Tax Period for which Philips may be liable under Section
6.9(b) and Section 6.9(f) (any such inquiry, claim, assessment, audit or similar event, a “Tax
Matter”); provided, however, that delay or failure to give such notification shall not affect
the indemnification provided in Section 6.9(f) except to the extent Philips shall have been
actually prejudiced as a result of such delay or failure. For Tax Matters relating solely to a
Pre-Closing Tax Period for which Philips acknowledges without reservation its obligation to
indemnify Newco therefore according to Section 6.9(b) and Section 6.9(f), Philips, at its own
expense, shall have the exclusive authority to represent the interests of the Company and the
Company Subsidiaries with respect to any Tax Matter before the U.S. Internal Revenue Service, any
other Taxing Authority, any other governmental agency or authority or any court and shall have the
sole right to extend or waive the statute of limitations with respect to a Tax Matter, including
responding to inquiries, filing Tax Returns and settling audits or lawsuits; provided, however,
that Philips shall not enter into any settlement of or otherwise compromise any Tax Matter that
affects or may affect the Tax Liability of Newco, the Company or any Company Subsidiary for any
Post-Closing Tax Period, including any Straddle Tax Period, without the prior written consent of
Newco, which consent shall not be unreasonably withheld. Philips shall keep Newco fully and timely
informed with respect to the commencement, status and nature of any Tax Matter. Philips and Newco
shall jointly represent the interests of the Company and the Company Subsidiaries with respect to
all Tax Matters relating to a Straddle Tax Period or relating to both a Pre-Closing Tax Period and
a Post-Closing Tax Period. Philips shall, in good faith, allow Newco or Newco’s counsel to consult
with it regarding the conduct of or positions taken in any such proceeding.

     (f) Indemnification.

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     (i) If in excess of, in the aggregate, €10 million (and then for the entire such
amount and not just the amount in excess of €10 million) and subject to Section
6.9(f)(iii) and (iv), Philips shall indemnify Newco in the form of an adjustment to the
Purchase Price against (A) any Taxes for any Pre-Closing Tax Period resulting from,
arising out of, relating to or caused by any Liability or obligation of the Company or any
Company Subsidiary for Taxes of any person other than the Company or any Company
Subsidiary and all Losses relating to such Taxes, (B) any Taxes and any Losses in respect
of such Taxes imposed on the Company or any Company Subsidiary as a result of the failure
of any member of the Philips Group to discharge such member’s obligation in respect of
such Taxes (unless such Taxes relate to a Post-Closing Period and the Company or any of
its Subsidiaries is primarily liable for such Taxes), (C) any Losses to Newco, the Company
or any Company Subsidiary resulting from a breach of any representation or warranty
contained in Section 4.8 or any covenant in this Section 6.9, (D) any Taxes and any Losses
relating to such Taxes imposed on Newco, the Company or any Company Subsidiary directly or
indirectly as a result of the Transaction (including any Taxes incurred as a result of the
application of Section 179 of the Taxation of Capital Gains Act 1992 (United Kingdom) or
similar provisions of state, local or foreign Law) and (E) any Taxes and any Losses
relating to such Taxes imposed on the Company or any Company Subsidiary for any
Pre-Closing Tax Period. Philips shall discharge its obligation to indemnify Newco against
such Pre-Closing Tax Period Tax by paying to Newco an amount equal to the amount of such
Tax or Loss relating to such Tax. In determining (A) whether any representation or
warranty contained in Section 4.8 was true and correct as of any particular date and (B)
the amount of any Losses in respect of the failure of any such representation or warranty
to be true and correct as of any particular date, any materiality standard applying to or
contained in such representation or warranty shall be disregarded.

     (ii) Newco shall indemnify Philips from and against (A) any Taxes and any Losses
relating to such Taxes paid by Philips or any Affiliate of Philips (other than the Company
or a Company Subsidiary) imposed on Newco, the Company, any Company Subsidiary or any
Affiliate of Newco for any Post-Closing Tax Period and (B) any breach of any covenant in
this Section 6.9 by Newco or any of its Affiliates. Newco shall discharge its obligation
to indemnify Philips against such Post-Closing Tax Period Tax by paying to Philips an
amount equal to the amount of such Tax.

     (iii) Notwithstanding Section 6.9(f)(i), Philips’ indemnity shall not apply to any
Tax or Loss attributable to the adverse treatment of a timing item in any Pre-Closing Tax
Period. For this purpose, an “adverse treatment of a timing item” shall mean any
deduction, loss or credit of an item properly claimed or deducted in the normal course
applying normal fiscal principles but disallowed by the Taxing Authorities to the extent
the adverse tax treatment of such item in a Pre-Closing Tax Period gives rise to an
equivalent amount of deduction, loss, or

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credit, as the case may be, actually realized in any Post-Closing Tax Period. For purposes
of illustration, and without limiting the foregoing, the capitalization of an amount that
has been deducted in a Pre-Closing Tax Period amounts to an adverse treatment of a timing
item to the extent that the amount capitalized actually results in depreciation or
amortization deductions in a Post-Closing Tax Period. The value of any such timing item
shall be calculated in the same manner as a “net Tax benefit” pursuant to Section 8.5(c).

     (iv) Notwithstanding Section 6.9(f)(i), Philips’ indemnity shall not apply to the
extent that (A) a provision or reserve in respect of that Tax or Loss has been made in the
Closing Date Net Working Capital Statement or (B) the Tax or Loss would not have arisen
but for, or is increased by, a transaction, action or omission (including a failure or
omission to make any claim for relief) carried out or effected by Newco, the Company or a
Company Subsidiary, including directors, employees, advisors, agents or successors in
title, at any time after the Closing Date.

     (v) In the event that an indemnified Loss is incurred by the Company or any Company
Subsidiary, Philips shall make the payment required hereunder directly to the Company or
such Company Subsidiary (unless such payment would create adverse tax consequences for
Philips, in which case the payment shall be made to Newco).

     (g) Conveyance and Transfer Taxes.

     (i) Each of Newco and Philips shall pay when due one-half of all transfer,
documentary, sales, use, stamp, registration and other such Taxes, and one-half of all
conveyance fees, recording charges and other fees and charges (including penalties and
interest) arising from the purchase of the Company Shares.

     (ii) Philips shall indemnify Newco in the form of an adjustment of the Purchase Price,
for all transfer, documentary, sales, use, stamp, registration and other such Taxes, and
all conveyance fees, recording charges and other fees and charges (including penalties and
interest) arising from Disentanglement for which Newco, the Company or any such Company
Subsidiary is liable (for the avoidance of doubt, other than the purchase by Newco of the
Company Shares).

     (iii) The Party that has the primary obligation to do so shall, at its own expense,
file all necessary Tax Returns and other documentation with respect to all such Taxes,
fees and charges described in the preceding sentence, and, if required by applicable Law,
Philips or Newco, as the case may be shall, and shall cause its Affiliates to, join in the
execution of any such Tax Returns and other documentation. To the extent that any Taxes
described in the second preceding sentence are required to be collected by Philips and
remitted to any

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Taxing Authority, Newco shall pay an amount equal to one-half of such Taxes to Philips,
and Philips shall remit such Taxes to the Taxing Authority.

     (iv) For the avoidance of doubt, this subsection (g) shall have priority over any
other provision of this Section 6.9, and Losses relating to conveyance and transfer taxes
referred to in Section 6.9(g)(ii) shall be subject to Section 8.5.

     (h) Limitations. The obligations of Philips pursuant to this Section 6.9 are not
limited by the provisions of Section 8.1 or Section 8.2 of this Agreement.

     Section 6.10 Release of Obligations. (a) Each Party shall procure that any trade
receivables and trade payables owed between Philips and its Affiliates (excluding the Company and
the Company Subsidiaries) on the one hand and the Company and the Company Subsidiaries on the
other hand, that remain outstanding at the Closing, will be settled in cash in accordance with the
usual terms and conditions of trading between such entities or, if there are no such terms and
conditions, within thirty (30) days of receipt of an invoice.

     (b) At the Closing, except with respect to Liabilities referred to in Section 6.10(a) and
Liabilities pursuant to ongoing commercial arrangements, (i) Philips shall, on behalf of itself and
each of its Affiliates (excluding the Company and the Company Subsidiaries), execute and deliver to
Newco, for the benefit of the Company and the Company Subsidiaries, a general release and
discharge, in form and substance reasonably satisfactory to Newco, releasing and discharging the
Company and the Company Subsidiaries from any and all Liabilities to Philips or its Affiliates
(excluding the Company and the Company Subsidiaries) in relation to the Business, including any
Liabilities arising from the representations and warranties given by the Company pursuant to
Article IV hereof (but otherwise excluding any Liabilities covered by this Agreement or any
Ancillary Agreement) and (ii) Newco shall, on behalf of itself and each of its Affiliates, execute
and deliver to Philips, for the benefit of Philips and its Affiliates (excluding the Company and
the Company Subsidiaries), a general release and discharge, in form and substance reasonably
satisfactory to Philips, releasing and discharging Philips and its Affiliates (excluding the
Company and the Company Subsidiaries) from any and all Liabilities to Newco or its Affiliates in
relation to the Business (other than any Liabilities covered by this Agreement or any Ancillary
Agreement). Newco may elect that the release and discharge referred to in this Section 6.10(b) may
be effected by way of an assignment or assumption of balances.

     (c) The Parties agree that the Company shall use reasonable efforts to use the Net Debt
Financing Amount for the payment of the purchase price owed by the Company or any Company
Subsidiary under any Local Business Transfer Agreement or Local Share Transfer Agreement and any
intercompany loans extended by Philips to the Company or any Company Subsidiary in connection with
the Company’s acquisition of the Business from Philips, other than trade receivables and payables
(collectively, the

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“Intercompany Loans”). If the Net Debt Financing Amount is less than the aggregate amount
of the Intercompany Loans, the balance shall be subject to the release and discharge referred to in
this Section 6.10(b)(i), provided that Newco shall have the right to require Philips to effect such
release and discharge by way of an assignment of such balance to Newco. If the Net Debt Financing
Amount is greater than the aggregate amount of the Intercompany Loans, the balance shall be treated
as the extension of a loan from the Company to Philips, which shall be subject to the release and
discharge referred to in this Section 6.10(b)(ii), provided that Newco shall have the right to
require Philips to effect such release and discharge by way of an assumption of such balance by
Newco.

     Section 6.11 Further Assurances. From time to time after the Closing Date, each Party
promptly shall, and shall cause its Affiliates to, execute, acknowledge and deliver any other
assurances or documents or instruments of transfer reasonably requested by the other Party and
necessary for the requesting party to satisfy its obligations under this Agreement or to obtain
the benefits of the Transaction. Without limiting the generality of the foregoing, to the extent
that Newco or Philips discover following Closing that any asset (except as specifically
contemplated by Section 2.6) that was intended to be transferred pursuant to this Agreement was
not transferred at the Closing, Philips shall use its reasonable best efforts to, or to cause its
Affiliates promptly to, assign and transfer to the Company or the relevant Company Subsidiary all
right, title and interest in such asset. Furthermore, to the extent that any Antitrust Approval is
not obtained or any applicable waiting period under any Antitrust Law has not expired or been
terminated as of the Closing, Newco shall continue to use its reasonable best efforts to obtain
such Antitrust Approval or to cause the expiration or termination of any applicable waiting period
under any Antitrust Law as soon as practicable. During the period from the Closing to the date of
transfer of such asset or the receipt of such Antitrust Approval or the expiration or termination
of any applicable waiting period under any Antitrust Law, Philips shall, to the extent permitted
by applicable Antitrust Law, use its reasonable best efforts to, or to cause its Affiliates to (a)
operate the relevant asset or entity in accordance with instructions received from the Company,
provided that any costs and expenses incurred in connection therewith shall be borne by the
Company and (b) as promptly as practicable make available to the Company or the relevant Company
Subsidiary any dividends paid and other distributions made by and any other economic benefits
generated by the relevant asset or entity, provided that the Company shall be responsible for the
obligations relating to and costs of ownership and operation of any such asset or entity.

     Section 6.12 Non-Solicit. (a) Philips agrees that, for a period of one (1) year from
and after the Closing Date, it shall not, and shall cause its Affiliates not to, without the prior
written consent of Newco, directly or indirectly, (i) hire, (ii) enter into a consulting agreement
with or (iii) solicit, encourage or induce to terminate an existing employment or consulting
relationship with any Employee holding a managerial position at the Closing. The foregoing
restrictions shall not preclude Philips or its Affiliates from hiring or entering into a
consulting agreement with any Employee who (i) initiated discussions with Philips or its
Affiliates that ultimately lead to the hiring of or entering

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into a consulting agreement with such Employee without being directly or indirectly solicited to
do so by Philips or its Affiliates, (ii) approached Philips or its Affiliates in response to a
general solicitation in newspapers or other media not targeted toward Employees or (iii) was
terminated by the Company or any Company Subsidiary prior to the commencement of discussions with
Philips or its Affiliates.

     (b) Newco agrees that for a period of one (1) year from and after the Closing Date, it shall
not, and shall cause its Affiliates not to, without the prior written consent of Philips, directly
or indirectly, (i) hire, (ii) enter into a consulting agreement with or (iii) solicit, encourage or
induce to terminate an existing employment or consulting relationship with any employee of Philips
or an Affiliate of Philips holding a managerial position at the Closing. The foregoing restrictions
shall not preclude Newco or its Affiliates from hiring or entering into a consulting agreement with
any such employee who (i) initiated discussions with Newco or its Affiliates that ultimately lead
to the hiring of or entering into a consulting agreement with such employee without being directly
or indirectly solicited to do so by Newco or its Affiliates, (ii) approached Newco or its
Affiliates in response to a general solicitation in newspapers or other media not targeted towards
employees of Philips or Affiliates of Philips or (iii) was terminated by Philips or any Affiliate
of Philips prior to the commencement of discussions with Newco or its Affiliates.

     Section 6.13 Confidentiality. (a) Philips shall, and shall cause each of its
Affiliates to, treat as confidential and shall safeguard any and all information, knowledge and
data relating to the Business, in each case by using the same degree of care, but no less than a
reasonable standard of care, to prevent the unauthorized use, dissemination or disclosure of such
information, knowledge and data as Philips or its Affiliates used with respect thereto prior to
the execution of this Agreement.

     (b) Newco shall treat as confidential and shall safeguard any and all information,
knowledge or data included in any information relating to the business of Philips and its
Affiliates other than the Business that becomes known to Newco as a result of the Transaction
except as otherwise agreed to by Philips in writing; provided, however, that nothing in this
Section 6.13(b) shall prevent the disclosure of any such information, knowledge or data to any
directors, officers or employees of Newco to whom such disclosure is necessary or desirable in
the conduct of the Business if such Persons are informed by Newco of the confidential nature of
such information and are directed by Newco to comply with the provisions of this Section
6.13(b).

     (c) Newco and Philips acknowledge that the confidentiality obligations set forth in this
Agreement shall not extend to information, knowledge and data that is publicly available or becomes
publicly available through no act or omission of the Party owing a duty of confidentiality, or
becomes available on a non-confidential basis from a source other than the Party owing a duty of
confidentiality so long as such source is not known by such Party to be bound by a confidentiality
agreement with or other obligations of secrecy to the other Party.

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     (d) In the event of a breach of the obligations under this Agreement by Newco or Philips, the
other Party, in addition to all other available remedies, will be entitled to injunctive relief to
enforce the provisions of this Section 6.13 in any court of competent jurisdiction.

     Section 6.14 Dividends. Philips shall deliver to Newco on the Closing Date a statement
summarizing all cash dividends paid and distributions made by the Company or any Company Subsidiary
during the period from January 1, 2006 to the Closing Date.

     Section 6.15 Ancillary Agreements. Philips shall not and shall procure that none of
its Subsidiaries shall claim from or pursue a claim against the Company or any of its Subsidiaries
under any Ancillary Agreement in the event that the fact or circumstance giving rise to such claim
is the subject of an indemnification claim under the body of this Agreement for which Philips is
liable, it being further agreed that, in the event of Philips being found liable under the body of
this Agreement after the claim has been satisfied under the relevant Ancillary Agreement, Philips
shall procure that the Company or the relevant Subsidiary of the Company is reimbursed with the
amount paid to Philips or its relevant Subsidiary by the Company or its relevant Subsidiary in
respect of the relevant claim under the relevant Ancillary Agreement. For the avoidance of doubt,
the exclusion of representations, warranties and indemnities set out in the various Ancillary
Agreements will be entirely without prejudice to the representations, warranties and indemnities
set out in the main body of this Agreement.

ARTICLE VII 

CONDITIONS TO CLOSING 

     Section 7.1 Conditions to the Obligations of Newco and Philips. The obligations of
Philips and Newco to effect the Closing shall be subject to the satisfaction or waiver by Philips
and Newco on or prior to the Closing Date of each of the following conditions:

     (a) Antitrust. The Initial Closing Antitrust Approvals shall have been obtained
or, alternatively, any waiting periods under the Initial Closing Antitrust Laws shall have
expired or been terminated.

     (b) No Violation of Laws and Governmental Orders. No Governmental Order shall have
been entered and remain in effect, and no Law shall have been enacted, entered, enforced or
promulgated by any Governmental Authority and be in effect, which in either case would restrain,
enjoin or otherwise prevent the performance of this Agreement or the consummation of the
Transaction in accordance with the terms of this Agreement.

     (c) Disentanglement; Sufficiency. The Disentanglement shall have been completed in
all material respects in accordance with the Disentanglement Schedule and, except as otherwise set
forth in this Agreement, the assets, properties and rights of the

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Company and the Company Subsidiaries as of the Closing, when taken together with the services to be
provided (and the assets, properties and rights of Philips and its Affiliates to be used in
providing such services), and the assets, properties and rights to be leased or licensed, to the
Company and the Company Subsidiaries by Philips and its Affiliates pursuant to the Ancillary
Agreements and the benefits to be made available to the Company and the Company Subsidiaries
pursuant to Section 6.11, shall constitute all the assets, property and rights necessary for the
Company and the Company Subsidiaries to conduct the Business in all material respect as conducted
immediately prior to the Closing by the Company and the Company Subsidiaries.

     (d) Debt Financing. Philips shall have received the Net Debt Financing Amount from the
Company in accordance with Section 6.10(c), with the Debt Financing Amount having been received by
the Company on terms and conditions which, taken as a whole, are no less favorable to the Company
in any material respect than those set out in the Debt Commitment Letter, no material conditions to
the Debt Financing Commitment shall have been waived without the prior written consent of Newco
(such consent not to be unreasonably withheld).

     Section 7.2 Conditions to the Obligations of Newco. The obligation of Newco to effect
the Closing shall be subject to the satisfaction (or waiver by Newco) on or prior to the Closing
Date of each of the following conditions:

     (a) Representations and Warranties. Each of the representations and warranties of each
of Philips and the Company contained in this Agreement that is qualified by a Philips Material
Adverse Effect and each of the representations contained in Section 3.1, Section 3.2, Section 3.5,
Section 4.1(a) (insofar as the Company is concerned) and Section 4.2 shall be true and correct as
of the date hereof and as of the Closing as if made on and as of the Closing (except for such
representations and warranties that are made as of a specific date which shall speak only as of
such date) and each of the representations and warranties of Philips contained in this Agreement
that is not qualified by a Philips Material Adverse Effect, except for the representations
contained in Section 3.1, Section 3.2, Section 3.5, Section 4.1(a) (insofar as the Company is
concerned) and Section 4.2, shall be true and correct with only such exceptions as have not had or
resulted in or would not be reasonably likely to have or result in a Philips Material Adverse
Effect as of the date hereof and as of the Closing as if made on and as of the Closing (except for
such representations and warranties as are made as of a specific date which shall speak only as of
such date).

     (b) Covenants. Philips and the Company shall have duly performed and complied in
all material respects with all covenants and agreements contained in this Agreement that are
required to be performed or complied with by them at or before the Closing.

     (c) Certificate. Newco shall have received a certificate, signed by a duly authorized
officer of each of Philips and the Company and dated the Closing Date, to the

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effect that the conditions set forth in Section 7.2(a) and Section 7.2(b) have been
satisfied.

     Section 7.3 Conditions to the Obligations of Philips. The obligation of Philips to
effect the Closing is subject to the satisfaction (or waiver by Philips) on or prior to the
Closing Date of each of the following conditions:

     (a) Representations and Warranties. Each of the representations and warranties of
Newco contained in this Agreement that is qualified by a Newco Material Adverse Effect and each
of the representations contained in Section 5.1 and Section 5.2 shall be true and correct as of
the date hereof and as of the Closing as if made on and as of the Closing (except for such
representations and warranties that are made as of a specific date which shall speak only as of
such date) and each of the representations and warranties of Newco contained in this Agreement
that is not qualified by a Newco Material Adverse Effect, except for the representations
contained in Section 5.1 and Section 5.2, shall be true and correct with only such exceptions as
have not had or resulted in or would not be reasonably likely to have or result in a Newco
Material Adverse Effect as of the date hereof and as of the Closing as if made on and as of the
Closing (except for such representations and warranties as are made as of a specific date which
shall speak only as of such date).

     (b) Covenants. Each of the covenants and agreements of Newco to be performed
on or prior to the Closing shall have been duly performed in all material respects.

     (c) Certificate. Philips shall have received a certificate, signed by a duly
authorized officer of Newco and dated the Closing Date, to the effect that the conditions set
forth in Section 7.3(a) and Section 7.3(b) have been satisfied.

ARTICLE VIII 

SURVIVAL; INDEMNIFICATION; CERTAIN REMEDIES 

     Section 8.1 Survival. The representations and warranties of Philips and Newco
contained in this Agreement shall survive the Closing for the period set forth in this Section 8.1.
All representations and warranties contained in this Agreement and all claims with respect thereto
shall terminate upon the expiration of one year after the Closing Date, except that (i) the
representations and warranties contained in Section 3.1, Section 3.2, Section 3.5, Section 4.1(a),
Section 4.2, Section 4.5(b), Section 5.1 and Section 5.2 shall survive until the expiration of the
applicable statute of limitations and (ii) the representations and warranties contained in Section
4.8, Section 4.11 and Section 4.14 shall terminate upon the expiration of two years after the
Closing Date.

     Section 8.2 Indemnification by Philips. (a) Philips hereby agrees that from and
after the Closing it shall indemnify, defend and hold harmless Newco from, against and in
respect of any Losses suffered by Newco, the Company or any Company

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Subsidiary resulting from (i) any breach of any representation or warranty made by Philips
contained in this Agreement for the period such representation or warranty survives (other than
those in Section 4.8, which shall be subject solely to the provisions of Section 6.9(f)) (it being
understood that for purposes of this Section 8.2(a) any qualifications relating to a Philips
Material Adverse Effect contained in such representation or warranty (other than in Section 4.4)
shall be disregarded for purposes of determining whether such representation or warranty was
breached), (ii) the claims raised by Company X (“Company X”) as summarized in Section 4.9
of the Disclosure Letter as well as any related claims raised by Company X or any of its Affiliates
prior or following the Date of this Agreement (together the “Company X Claims”) (any Losses
relating to such claims, the “Company X Losses”) or (iii) any breach of any covenant or
agreement of Philips contained in this Agreement. In the event that an indemnified Loss is incurred
by the Company or any Company Subsidiary, Philips shall make the payment required hereunder
directly to the Company or such Company Subsidiary (unless such payment would create adverse tax
consequences for Philips, in which case the payment shall be made to Newco).

     (b) Notwithstanding Section 8.2(a), Philips shall not be liable to Newco for any Losses
(other than any Company X Losses, for which Philips shall be liable in their entirety, provided
that Newco has complied with its obligations pursuant to Section 8.4(f)) unless such Losses exceed
(i) an amount equal to €1 million with respect to each individual indemnification claim or series
of related claims arising out of the same facts or circumstances or (ii) an aggregate amount equal
to two percent (2%) of the Purchase Price, and then for the total and not only for Losses in
excess of that amount and up to an aggregate amount equal to ten percent (10%) of the Purchase
Price, provided that the limitations hereunder shall not apply in respect of any liability of
Philips under Section 6.3 (provided, however, that Philips shall not be liable to Newco for any
Losses resulting from a breach by Philips of Section 6.3, unless such Losses exceed in the
aggregate €10 million) or a breach of the representations and warranties set out in Section 3.1,
Section 3.2, Section 3.5, Section 4.1(a), Section 4.2 and Section 4.5(b).

     Section 8.3 Indemnification by Newco. Newco hereby agrees that from and after the
Closing it shall indemnify, defend and hold harmless Philips from, against and in respect of any
Losses suffered by Philips resulting from (a) any breach of any representation or warranty made by
Newco contained in this Agreement for the period such representation or warranty survives or (b)
any breach of a covenant or agreement of Newco contained in this Agreement.

     Section 8.4 Third Party Claim Indemnification Procedures. (a) In the event that any
written claim or demand for which an indemnifying party (an “Indemnifying Party”) may
have liability to any Party entitled to indemnification under Section 8.2 or Section 8.3 (an
“Indemnified Party”) is asserted against or sought to be collected from any Indemnified
Party by a third party (a “Third Party Claim”), such Indemnified Party shall promptly,
but in no event more than ten days following such Indemnified Party’s receipt of a Third Party
Claim, notify the Indemnifying Party in writing of such Third

- 47 -

 

Party Claim, the amount or the estimated amount of damages sought thereunder to the extent then
ascertainable (which estimate shall not be conclusive of the final amount of such Third Party
Claim), any other remedy sought thereunder, any relevant time constraints relating thereto and, to
the extent practicable, any other material details pertaining thereto (a “Claim Notice”);
provided, however, that the failure timely to give a Claim Notice shall affect the rights of an
Indemnified Party under this Agreement only to the extent that such failure has a material
prejudicial effect on the amount of Losses or on the defenses or other rights available to the
Indemnifying Party with respect to such Third Party Claim. The Indemnifying Party shall have thirty
(30) days (or such lesser number of days set forth in the Claim Notice as may be required by court
proceeding in the event of a litigated matter) after receipt of the Claim Notice (the “Notice
Period”) to notify the Indemnified Party that it desires to defend the Indemnified Party
against such Third Party Claim.

     (b) In the event that the Indemnifying Party notifies the Indemnified Party within the Notice
Period that it desires to defend the Indemnified Party against a Third Party Claim, the
Indemnifying Party shall have the right to defend the Indemnified Party by appropriate proceedings
and shall have the sole power to direct and control such defense at its expense. Once the
Indemnifying Party has duly assumed the defense of a Third Party Claim, the Indemnified Party shall
have the right, but not the obligation, to participate in any such defense and to employ separate
counsel of its choosing. The Indemnified Party shall participate in any such defense at its expense
unless (i) the Indemnifying Party and the Indemnified Party are both named parties to the
proceedings and the Indemnified Party shall have reasonably concluded that representation of both
Parties by the same counsel would be inappropriate due to actual or potential differing interests
between them or (ii) the Indemnified Party assumes the defense of a Third Party Claim after the
Indemnifying Party has failed to diligently pursue a Third Party Claim it has assumed, as provided
in the first sentence of Section 8.4(c). The Indemnifying Party shall not, without the prior
written consent of the Indemnified Party, settle, compromise or offer to settle or compromise any
Third Party Claim on a basis that would result in (i) the imposition of a consent order, injunction
or decree that would restrict the future activity or conduct of the Indemnified Party or any of its
Affiliates, (ii) a finding or admission of a violation of Law or violation of the rights of any
Person by the Indemnified Party or any of its Affiliates, (iii) a finding or admission that would
have an adverse effect on other claims made or threatened against the Indemnified Party or any of
its Affiliates or (iv) any monetary liability of the Indemnified Party that will not be promptly
paid or reimbursed by the Indemnifying Party.

     (c) If the Indemnifying Party (i) elects not to defend the Indemnified Party against a Third
Party Claim, whether by not giving the Indemnified Party timely notice of its desire to so defend
or otherwise or (ii) after assuming the defense of a Third Party Claim, fails to take reasonable
steps necessary to defend diligently such Third Party Claim within ten days after receiving written
notice from the Indemnified Party to the effect that the Indemnifying Party has so failed, the
Indemnified Party shall have the right but not the obligation to assume its own defense; it being
understood that the Indemnified

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Party’s right to indemnification for a Third Party Claim shall not be adversely affected by
assuming the defense of such Third Party Claim. The Indemnified Party shall not settle a Third
Party Claim without the consent of the Indemnifying Party, which consent shall not be unreasonably
withheld.

     (d) The Indemnified Party and the Indemnifying Party shall cooperate in order to ensure the
proper and adequate defense of a Third Party Claim, including by providing access to each other’s
relevant business records and other documents, and employees; it being understood that the costs
and expenses of the Indemnified Party relating thereto shall be Losses.

     (e) The Indemnified Party and the Indemnifying Party shall use reasonable best efforts to
avoid production of confidential information (consistent with applicable Law), and to cause all
communications among employees, counsel and others representing any party to a Third Party Claim to
be made so as to preserve any applicable attorney-client or work-product privileges.

     (f) Notwithstanding anything in Article VIII to the contrary but subject to this Section
8.4(f), the Parties agree that from the date hereof Philips shall have the sole right to defend
and/or settle the Company X Claims as well as any claims by which recourse is sought against any
suppliers of the red phosphorus molding compound (or any of their Affiliates, agents or
intermediaries) (collectively, the “Related Claims”) and the sole power to direct and
control such defense and/or settlement at its cost. Philips undertakes to keep Newco informed on
all material developments concerning the Company X Claims and the Related Claims. Newco shall, and
shall cause the Company and the Company Subsidiaries to, cooperate in all commercially reasonable
ways with Philips and at Philips’ cost and expense (except as set forth below) in connection with
the defense and/or settlement of the Company X Claims and any Related Claims, including without
limitation by (i) furnishing promptly all information requested by Philips that may be necessary
or desirable in connection with such defense and/or settlement or that otherwise relates to the
Company X Claims or any Related Claims, (ii) providing personnel (including, but not limited to,
Guido Dierick, Koen van Holten, Eef Bagerman, Wouter Schuddeboom, Alain Andres, François Quinones,
Lennart Nilsson and Mikael Gustafsson, all of whom shall cooperate in relation to the Company X
Claims and any Related Claims in the same manner as prior to the date hereof) as requested by and
at no cost to Philips (other than for reasonable out of pocket expenses) and (iii) consulting and
cooperating with Philips in the preparation of analyses, appearances, presentations, memoranda,
briefs, arguments, opinions, filings, notifications and proposals made or submitted by Philips in
connection with the Company X Claims or any Related Claims. In addition, Newco shall, and shall
cause the Company and the Company Subsidiaries to, take all actions reasonably requested by
Philips to facilitate resolution of the Company X Claims and any Related Claims provided that (i)
such actions are not unduly disruptive to the Business and (ii) Philips reimburses Newco, the
Company and the Company Subsidiaries for all costs and expenses associated with such actions
(including costs and expenses in the form of discounts granted by the Company on future purchases
to be

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made by Company X as part of any settlement, which costs and expenses shall be set off against any
benefits to the Company that may arise in the context of such settlement). The final sentence of
Section 8.4(b) shall apply equally to this Section 8.4(f).

     Section 8.5 Adjustments to Losses.

     (a) Insurance. In calculating the amount of any Loss, the proceeds actually
received by the Indemnified Party or any of its Affiliates under any insurance policy or
pursuant to any claim, recovery, settlement or payment by or against any other Person, net of
any actual costs, expenses or premiums incurred in connection with securing or obtaining such
proceeds, shall be deducted.

     (b) Purchase Price Adjustment. In calculating the amount of any Loss for which
Newco is entitled to indemnification under this Agreement, the amount of any reserve reflected
in the Closing Date Financial Statements specifically related to such Loss shall be deducted.
Newco shall not be indemnified to the extent the matter in question has been resolved and
resulted in a Purchase Price Adjustment pursuant to Section 2.7.

     (c) Taxes. In calculating the amount of any Loss, there shall be deducted an amount
equal to any net Tax benefit actually realized (including the utilization of a Tax loss or Tax
credit carried forward) as a result of such Loss by the Party claiming such Loss, and there shall
be added an amount equal to any Tax imposed on the receipt of any indemnity payment with respect
thereto. The amount of a net Tax benefit shall be the present value of the Tax benefit as of the
date of any indemnification payment (using the interest rate calculation of Section 6621(a)(2) of
the Code and assuming the Indemnified Party has sufficient Taxable income or other Tax attributes
to permit the utilization of such Tax benefit at the earliest possible time) multiplied by (i) the
combined applicable effective corporate tax rates in effect at the time of the indemnity payment
or (ii) in the case of a credit, 100%.

     (d) Reimbursement. If an Indemnified Party recovers an amount from a third party in
respect of a Loss that is the subject of indemnification under this Agreement after all or a
portion of such Loss has been paid by an Indemnifying Party pursuant to this Article VIII, the
Indemnified Party shall promptly remit to the Indemnifying Party the excess (if any) of (i) the
amount paid by the Indemnifying Party in respect of such Loss, plus the amount received from the
third party in respect thereof, less (ii) the full amount of Loss.

     Section 8.6 Payments. The Indemnifying Party shall pay all amounts payable pursuant
to this Article VIII, by wire transfer of immediately available funds, promptly following receipt
from an Indemnified Party of a bill, together with all accompanying reasonably detailed back-up
documentation, for a Loss that is the subject of indemnification under this Agreement, unless the
Indemnifying Party in good faith disputes the Loss, in which event it shall so notify the
Indemnified Party. In any event,

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the Indemnifying Party shall pay to the Indemnified Party, by wire transfer of immediately
available funds, the amount of any Loss for which it is liable under this Agreement no later
than three days following any final determination of such Loss and the Indemnifying Party’s
liability therefore. A “final determination” shall exist when (a) the parties to the dispute
have reached an agreement in writing, (b) a court of competent jurisdiction shall have entered a
final and non-appealable order or judgment, or (c) an arbitration or like panel shall have
rendered a final non-appealable determination with respect to disputes the Parties have agreed
to submit thereto.

     Section 8.7 Characterization of Indemnification Payments. All payments made by an
Indemnifying Party to an Indemnified Party in respect of any claim pursuant to Section 8.2 and
Section 8.3 shall be treated as adjustments to the Purchase Price for Tax purposes.

     Section 8.8 Mitigation. (a) Each Indemnified Party shall use its commercially
reasonable efforts to mitigate any indemnifiable Loss. In the event an Indemnified Party fails to
so mitigate an indemnifiable Loss, the Indemnifying Party shall have no liability for any portion
of such Loss that could reasonably have been avoided had the Indemnified Person made such efforts.
Without limiting the foregoing, after Newco acquires knowledge of any fact or circumstance that
results in or reasonably would be expected to result in an indemnified Loss or Third Party Claim
under this Agreement, Newco shall notify Philips promptly and implement such reasonable actions as
Philips shall request in writing for the purposes of mitigating the possible Losses arising
therefrom (such actions, “Mitigation Actions”). In determining whether a proposed
Mitigation Action is reasonable, the Parties will take into account, among other relevant factors,
(i) the requirements of Law, (ii) what is reasonably advisable in order to avoid a material
potential liability, (iii) the industry standards and practices in respect of similar facts and
circumstances, (iv) the economic, regulatory, legal, administrative and other costs and benefits
of such action (as opposed to no action or alternative possible actions) to Newco and its
Affiliates (without regard to the existence of any indemnification obligation of Philips under
this Article VIII) and (v) the interest of the Company and the Company Subsidiaries in maintaining
good commercial relationships with its employees, customers and suppliers.

     Section 8.9 Remedies. Following the Closing the rights and remedies of Philips and
Newco under this Article VIII shall be exclusive and in lieu of any and all other rights and
remedies which Philips and Newco may have under this Agreement or otherwise against each other
with respect to the Purchase for monetary relief with respect to any breach of any representation
or warranty or any failure to perform any covenant or agreement set forth in this Agreement, and
Newco and Philips each expressly waives any and all other rights or causes of action it or its
Affiliates may have against the other Party or its Affiliates now or in the future under any Law
with respect to the subject matter hereof. In the event the Closing contemplated hereunder does
not occur, Philips acknowledges that its recourse against Newco, the Investors and others as set
forth in the Investor Equity Commitment Letter is limited by the arrangements in the Investor
Equity

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Commitment Letter, and Newco acknowledges that its recourse against Philips is limited by the
arrangements in the Philips Equity Commitment Letter.

     Section 8.10 Waiver. As of the Closing, Philips shall waive any and all claims against
any Employees in connection with their employment by Philips or any Affiliate of Philips or in
connection with their involvement in the preparation of this Agreement or any Ancillary Agreements,
except for claims based on willful misconduct or fraud.

ARTICLE IX 

TERMINATION 

     Section 9.1 Termination. This Agreement may be terminated at any time prior to the
Closing:

     (a) by written agreement of Newco and Philips; or

     (b) by either Newco or Philips, by giving written notice of such termination to the other
Party, if the Closing shall not have occurred on or prior to March 31, 2007 so long as the
terminating Party is not in material breach of its obligations under this Agreement.

     Section 9.2 Effect of Termination. In the event of the termination of this Agreement
in accordance with Section 9.1, this Agreement shall thereafter become void and have no effect, and
no Party shall have any liability to the other Party hereto or their respective Affiliates, or
their respective directors, officers or employees, except for the obligations of the Parties
contained in this Section 9.2 and in Section 10.1, Section 10.4, Section 10.6, Section 10.7,
Section 10.8, Section 10.9, Section 10.10, Section 10.11 and Section 10.12 (and any related
definitional provisions set forth in Article I), and except that nothing in this Section 9.2 shall
relieve any Party from liability for any breach of this Agreement that arose prior to such
termination, for which liability the provisions of Article VIII shall remain in effect in
accordance with the provisions and limitations of such Article.

ARTICLE X 

MISCELLANEOUS 

     Section 10.1 Notices. All notices and communications under this Agreement shall be
deemed to have been duly given and made if in writing and if served by personal delivery upon the
party for whom it is intended or delivered by registered or certified mail, return receipt
requested, or if sent by telecopier or email, provided that the telecopy or email is promptly
confirmed by telephone confirmation thereof, to the person at the address set forth below, or such
other address as may be designated in writing hereafter, in the same manner, by such person:

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To Newco:

KASLION Acquisition B.V. 
High
Tech Campus 60 

5656 AG
Eindhoven 

The Netherlands

Telephone: (31) 20 5407575

Telecopy: (31) 20 5407500

Email: erik.thyssen@alpinvest.com 

Attn:
Erik Thyssen

With a copy to:

Kohlberg Kravis Roberts & Co. Ltd.

Stirling Square

7 Carlton Gardens

London 

SW1Y 5AD

United Kingdom

Telephone: (44) 207 839-9800

Telecopy: (44) 207 839-9801

Email: huthj@kkr.com

Attn: Johannes Huth

Silver Lake Management Company, L.L.C.

2775 Sand Hill Road, Suite 100

Menlo Park, CA 94025

United States

Telephone: (650) 233-8158

Telecopy: (650) 233-8125

Email: karen.king@silverlake.com

Attn: Karen King, General Counsel

Bain Capital, Ltd.

Devonshire House

Mayfair Place

London W1J 8AJ

United Kingdom

Telephone: (44) 20 7514 5252

Telecopy: (44) 20 7514 5250

Email: mplantevin@baincapital.com

Attn: Michel Plantevin

Apax Partners Beteiligungsberatung GmbH

Possartstrasse 11

- 53 -

 

81679 München

Germany

Telephone: (49) 89 998909 0

Telecopy: (49) 89 998909 33

Email: Christian.Reitberger@apax.de

Attn: Christian Reitberger

AlpInvest Partners CS Investments 2006 C.V.

Jachthavenweg 118

1081 KJ Amsterdam

The Netherlands

Telephone: (31) 20 5407575

Telecopy: (31) 20 5407500

Email: erik.thyssen@alpinvest.com 

Attn: Erik
Thyssen

Clifford Chance LLP 

Droogbak 1A

1013 GE Amsterdam

The Netherlands

Telephone: (31) 20 711-9000

Telecopy: (31) 20 711-9999

Email: thijs.alexander@cliffordchance.com

Attn: Thijs Alexander

To the Company:

Philips Semiconductors International B.V.

High Tech Campus

Professor Holstlaan 4

Buidling HTC – 60

5656 AA Eindhoven

The Netherlands

Telephone: (31) 40 272-2041

Telecopy: (31) 40 272-4005

Email: guido.dierick@nxp.com

Attn: Guido Dierick

With a copy to:

Kohlberg Kravis Roberts & Co. Ltd.

Stirling Square

7 Carlton Gardens

London

SW1Y 5AD

- 54 -

 

United Kingdom

Telephone: (44) 207 839-9800

Telecopy: (44) 207 839-9801

Email: huthj@kkr.com

Attn: Johannes Huth

Silver Lake Management Company, L.L.C.

2775 Sand Hill Road, Suite 100

Menlo Park, CA 94025

United States

Telephone: (650) 233-8158

Telecopy: (650) 233-8125

Email: karen.king@silverlake.com

Attn: Karen King, General Counsel

Bain Capital, Ltd.

Devonshire House

Mayfair Place

London W1J 8AJ

United Kingdom

Telephone: (44) 20 7514 5252

Telecopy: (44) 20 7514 5250

Email: mplantevin@baincapital.com 

Attn:
Michel Plantevin

Apax Partners Beteiligungsberatung GmbH

Possartstrasse 11

81679 München

Germany

Telephone: (49) 89 998909 0

Telecopy: (49) 89 998909 33

Email: Christian.Reitberger@apax.de

Attn: Christian Reitberger

AlpInvest Partners CS Investments 2006 C.V.

Jachthavenweg 118

1081 KJ Amsterdam

The Netherlands

Telephone: (31) 20 5407575

Telecopy: (31) 20 5407500

Email: erik.thyssen@alpinvest.com

Attn: Erik Thyssen

Clifford Chance LLP

- 55 -

 

Droogbak 1A

1013 GE Amsterdam

The Netherlands

Telephone: (31) 20 711-9000

Telecopy: (31) 20 711-9999

Email: thijs.alexander@cliffordchance.com

Attn: Thijs Alexander

To Philips:

Koninklijke Philips Electronics N.V.

Breitner Center

Amstelplein 2

1096 BC Amsterdam

The Netherlands

Telephone: (31) 20 597-7232

Telecopy: (31) 20 597-7150

Email: eric.coutinho@philips.com

Attn: Eric Coutinho

With a copy to:

Sullivan & Cromwell LLP

1 New Fetter Lane

London EC4A 1AN

United Kingdom

Telephone: (44) 20 7959-8900

Telecopy: (44) 20 7959-8950

Email: brayg@sullcrom.com

Attn: Garth W. Bray

and

De Brauw Blackstone Westbroek N.V.

Tripolis

Burgerweeshuispad 301

1076 HR Amsterdam

Telephone: (31) 20 577-1421

Telecopy: (31) 20 577-1874

Email: arne.grimme@debrauw.com 

Attn:
Arne Grimme

     Each such notice, request or communication shall be effective when received or, if given by
mail, when delivered at the address or addresses specified in this Section or

- 56 -

 

on the fifth Business Day following the date on which such communication is posted, whichever
occurs first.

     Section 10.2 Amendment; Waiver. Any provision of this Agreement may be amended or
waived if, and only if, such amendment or waiver is in writing and signed, in the case of an
amendment, by Newco and Philips, or in the case of a waiver, by the Party against whom the waiver
is to be effective. No failure or delay by any Party in exercising any right, power or privilege
under this Agreement shall operate as a waiver thereof nor shall any single or partial exercise
thereof preclude any other or further exercise thereof or the exercise of any other right, power or
privilege. By virtue of effecting the Closing, Newco shall not, and shall not be deemed to, have
waived any of its rights to claim under any of the provisions of this Agreement. The rights and
remedies in this Agreement provided shall be cumulative and not exclusive of any rights or remedies
provided by Law, except as otherwise specifically provided in Article VIII hereof.

     Section 10.3 No Assignment or Benefit to Third Parties. This Agreement shall be
binding upon and inure to the benefit of the Parties and their respective successors, legal
representatives and permitted assigns. None of the Parties may assign any of its rights or delegate
any of its obligations under this Agreement, by operation of Law or otherwise, without the prior
written consent of the other Party, except as provided in Section 10.5 and except that each of
Newco and Philips may assign any and all of its rights under this Agreement or any Ancillary
Agreement to one or more of its wholly owned subsidiaries (but no such assignment shall relieve
Newco or Philips, as applicable, of any of its obligations under this Agreement). Nothing in this
Agreement, express or implied, is intended to confer upon any Person other than Newco, Philips, the
Indemnified Parties and their respective successors, legal representatives and permitted assigns,
any rights or remedies under or by reason of this Agreement.

     Section 10.4 Entire Agreement. This Agreement (including all Schedules and Exhibits)
and the Ancillary Agreements contain the entire agreement between the Parties with respect to the
subject matter hereof and thereof and supersedes all prior agreements and understandings, oral or
written, with respect to such matters.

     Section 10.5 Fulfillment of Obligations. Any obligation of any party to any other
party under this Agreement, or any of the Ancillary Agreements, which obligation is performed,
satisfied or fulfilled completely by an Affiliate of such party, shall be deemed to have been
performed, satisfied or fulfilled by such party.

     Section 10.6 Public Disclosure. Notwithstanding anything to the contrary contained in
this Agreement, except as may be required to comply with the requirements of any applicable Law
and the rules and regulations of any stock exchange upon which the securities of one of the
Parties is listed, from and after the date hereof, no press release or similar public announcement
or communication shall be made or caused to be made relating to this Agreement unless specifically
approved in advance by both Parties.

- 57 -

 

     Section 10.7 Expenses. Except as otherwise expressly provided in this Agreement,
whether or not the Purchase is consummated, all costs and expenses incurred in connection
with this Agreement and the Purchase shall be borne by the Party incurring such costs and
expenses. From and after Closing, the Company will pay all transaction costs relating to
the Debt Financing and the Revolving Credit Facility incurred by Philips or by Newco or any
of its direct or indirect shareholders, or by any of Philips’ and Newco’s respective
managers or advisors, including, in each case, the commissions, fees and expenses of any
external advisers related thereto.

     Section 10.8 Due Diligence Information; Schedules. The disclosure of any matter in
the Due Diligence Information or any Schedule shall be deemed to be a disclosure for all purposes
of this Agreement to which such matter could reasonably be expected to be pertinent, but shall not
be deemed to constitute an admission by Philips or Newco or to otherwise imply that any such
matter is material for the purposes of this Agreement.

     Section 10.9 Governing Law; Submission to Jurisdiction; Selection of Forum. This
Agreement and any agreements to be entered into pursuant to it, save as expressly otherwise
provided therein, shall be governed by and construed in accordance with the laws of The
Netherlands. Except for the dispute resolution mechanism provided for in Section 2.7, Philips and
Newco irrevocably agree that all disputes which may arise out of or in connection with this
Agreement and the existence and validity thereof, shall be exclusively resolved by the district
court of Amsterdam, The Netherlands.

     Section 10.10 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, and all of which shall constitute one and
the same Agreement.

     Section 10.11 Headings. The heading references in this Agreement and the table of
contents hereof are for convenience purposes only, and shall not be deemed to limit or affect any
of the provisions hereof.

     Section 10.12 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 hereof. If any provision of this Agreement, or the
application thereof to any Person or any circumstance, is invalid or unenforceable, (a) a suitable
and equitable provision shall be substituted therefore in order to carry out, so far as may be
valid and enforceable, the intent and purpose of such invalid or unenforceable provision and (b)
the remainder of this Agreement and the application of such 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 such provision, or the
application thereof, in any other jurisdiction.

- 58 -

 

     IN
WTINESS WHEREOF, the Parties have executed or caused this Agreement to be
executed as of the date first written above.

	 	 	 	 	 
	 	Koninklijke Philips Electronics N.V.
 	 
	 
	 	By:  	/s/ E.P. Coutinho	 
	 	Title:  	General Secretary	 
	 
	 	Philips Semiconductors International B.V.
 	 
	 
	 	By:  	/s/ G.R.C. Dierick	 
	 	Title:  	General Counsel	 
	 
	 	KASLION Acquisition B.V.
 	 
	 
	 	By:  	/s/ E.M.J. Thyssen	 
	 	Title:  	Managing Director

Alpinvest Partners 2006 B.V.
	 
	 
	 	By:  	/s/ C.F. de Ru	 
	 	Title:  	Senior Legal Counsel

Alpinvest Partners 2006 B.V.

	 
	 	By:  	/s/ Nicolas Cattelain	 
	 
	 	By:  	/s/ Axel Holtrup 	 
	 	Title:  	Director Silverlake	 

[Stock Purchase Agreement Signature Page]EXHIBIT 10.46

                                                                           FINAL
                                                                           =====
                           PURCHASE AND SALE AGREEMENT

     This 20th day of February, 2007

1.   PARTIES

     Quaker Fabric Corporation of Fall River, a Massachusetts corporation,
     hereinafter called "SELLER," agrees to SELL

     and

     Rosewood Management Associate, Inc., a Massachusetts corporation, or its
     corporate nominee, hereinafter called "BUYER," agrees to BUY, upon the
     terms hereinafter set forth, the following described premises:

2.   DESCRIPTION

     The land with the building and improvements thereon located at 1082 Davol
     Street, Fall River, Bristol County, Massachusetts more particularly
     described in Exhibit A (hereinafter the "Premises").

3.   TITLE DEED

     The Premises are to be conveyed by a good and sufficient quitclaim deed,
     the form of which is attached hereto as Exhibit B, running to BUYER, or to
     the nominee designated by BUYER by written notice to SELLER at least three
     (3) business days before the deed is to be delivered as herein provided,
     and said deed shall convey a good and clear record and marketable title
     thereto, free from encumbrances, except:

     (a)  Provisions of existing building and zoning laws;

     (b)  Such taxes for the then current year as are not due and payable on the
          date of the delivery of such deed;

     (c)  Easements, restrictions and agreements of record insofar as in force
          and applicable; and

     (d)  Any liens for municipal betterments assessed after the date of this
          Agreement.

                                       6
<PAGE>

     Any matter relating to the performance of this Agreement that is the
     subject of a title, practice or ethical standard of the Massachusetts
     Conveyancers Association shall be governed by the provision of said
     standard to the extent applicable.

4.   PURCHASE PRICE

     The agreed purchase price for the Premises is Four Million Seven Hundred
     Thousand and 00/100 Dollars ($4,700,000.00), of which

     $   230,000    have been paid to Stewart Title Guaranty Company ("Escrow
     -----------    Agent") as the deposit this day (subject to collection) ("
                    Initial Deposit"; prior to the second payment referenced
                    below, the "Deposit");

     $   100,000    shall be paid within two (2) business days after the
     -----------    expiration of the Inspection Period (as defined below)
                    should BUYER proceed with the transaction (together with the
                    Initial Deposit, the "Deposit"), and

     $ 4,370,000    are to be paid by wire transfer of immediately available
     -----------    federal funds at the time of delivery of the deed in
                    accordance with the terms of this Purchase and Sale
                    Agreement.

     ===========

     $ 4,700,000    TOTAL
     -----------

5.   TIME FOR PERFORMANCE; DELIVERY OF DEED

     The delivery of the deed will take place at the offices of Wilmer Cutler
     Pickering Hale and Dorr LLP, 60 State Street, Boston, Massachusetts at 10
     a.m. on a date designated by no less than five (5) business days prior
     written notice from BUYER to SELLER but no later than March 15, 2007. It is
     agreed that time is of the essence of this Agreement.

6.   POSSESSION AND CONDITION OF PREMISES

     Full possession of the Premises is to be delivered at the time of the
     delivery of the deed, the Premises to be then in the same condition as they
     are now, reasonable use and wear thereof excepted. BUYER shall be entitled
     to inspect the Premises prior to the delivery of the deed in order to
     determine whether the condition thereof complies with the terms of this
     clause. It shall be a condition to the performance of BUYER hereunder that
     there be no change in the corporate status of SELLER that would materially
     impair its ability to perform its obligations hereunder.

7.   EXTENSION TO PERFECT TITLE OR MAKE PREMISES CONFORM

     If SELLER shall be unable to give title or to make conveyance, as herein
     stipulated, or if at the time of the delivery of the deed the Premises do
     not conform with the provisions hereof, then all payments made under this
     agreement shall be refunded and all other obligations of the parties hereto
     shall cease and this agreement shall be void and without recourse to the
     parties hereto, unless SELLER shall elect, in its sole discretion, to use
     reasonable efforts to remove any defects in title, or to make the Premises
     conform to the provisions hereof, as the case may be, in which event SELLER
     shall give written notice thereof to BUYER at or before the time for
     performance hereunder, and thereupon the time for performance hereof shall
     be extended for a period of thirty days. Notwithstanding the foregoing,
     SELLER shall cause any mortgages and other voluntary monetary encumbrances
     encumbering the Premises to be discharged at the Closing.

                                       7
<PAGE>

8.   FAILURE TO PERFECT TITLE OR MAKE PREMISES CONFORM

     If at the expiration of the extended time SELLER shall have failed so to
     remove any defects in title, or make the Premises conform, as the case may
     be, all as herein agreed, then any payments made under this Agreement shall
     be forthwith refunded to BUYER and all other obligations of the parties
     hereto shall cease and this Agreement shall be void without recourse to the
     parties hereto.

9.   BUYER'S ELECTION TO ACCEPT TITLE

     In addition to BUYER's rights under the provisions of Sections 7 and 8
     above, BUYER shall have the election, at either the original or any
     extended time for performance, to accept such title as SELLER can deliver
     to the Premises in their then condition and to pay therefore the purchase
     price without deduction, in which case SELLER shall convey such title.

10.  ACCEPTANCE OF DEED

     The acceptance of a deed by BUYER or its nominee as the case may be, shall
     be deemed to be a full performance and discharge of every agreement and
     obligation herein contained or expressed, except such as are, by the terms
     hereof, to be performed after the delivery of said deed.

11.  USE OF MONEY TO CLEAR TITLE

     To enable SELLER to make conveyance as herein provided, SELLER may, at the
     time of delivery of the deed, use the purchase money or any portion thereof
     to clear the title of any or all encumbrances or interests, provided that
     all instruments so procured are either recorded simultaneously with the
     delivery of said deed or thereafter consistent with customary Massachusetts
     conveyancing practice.

12.  INSURANCE

     Until the delivery of the deed, SELLER shall maintain such insurance on the
     Premises as is presently in force.

                                       8
<PAGE>

13.  ADJUSTMENTS

     Interest on the Deposit shall be credited to BUYER, unless the Deposit is
     retained by SELLER under the provisions of Section 17 below, in which event
     the Deposit with interest thereon shall be paid to SELLER. Water, sewer and
     other utility services shall be adjusted as of the date of closing. SELLER
     shall receive a credit for any deposits held by utility providers with
     respect to the Premises. SELLER shall be responsible for the payment of
     Massachusetts deed excise stamps. The parties shall share equally the
     expense of the Escrow Agent.

14.  ADJUSTMENT OF UNASSESSED AND ABATED TAXES

     If the amount of said taxes is not known at the time of the delivery of the
     deed, they shall be apportioned on the basis of the taxes assessed for the
     preceding fiscal year, with a reapportionment as soon as the new tax rate
     and valuation can be ascertained; and if the taxes which are to be
     apportioned shall thereafter be reduced by abatement, the amount of such
     abatement, less the reasonable cost of obtaining the same, shall be
     apportioned between the parties, provided that neither party shall be
     obligated to institute or prosecute proceedings for an abatement unless
     herein otherwise agreed.

15.  BROKER

     SELLER and BUYER each represents to the other that it has not dealt with
     any broker or agent in connection with this transaction other than Giroux
     and Company (the "Broker"). SELLER shall be solely responsible for the
     payment of any brokerage fee to the Broker if, as and when title passes and
     consideration is paid. Each party hereby indemnifies and holds harmless the
     other party from all loss, cost and expense (including reasonable
     attorneys' fees) arising out of a breach of its representation or
     undertaking set forth in this paragraph. The provisions of this paragraph
     shall survive the delivery of the deed or the termination of this
     agreement.

16.  DEPOSIT

     Escrow Agent shall hold the Deposit accordance with the terms and
     provisions of this Agreement, subject to the following:

          16.1. Obligations. Escrow Agent undertakes to perform only such duties
          as are expressly set forth in this Agreement and no implied duties or
          obligations shall be read into this Agreement against Escrow Agent.

          16.2. Reliance. Escrow Agent may act in reliance upon any writing or
          instrument or signature which it, in good faith, believes, and any
          statement or assertion contained in such writing or instrument, and
          may assume that any person purporting to give any writing, notice,
          advice or instrument in connection with the provisions of this
          Agreement has been duly authorized to do so. Escrow Agent shall not be
          liable in any manner for the sufficiency or correctness as to form,
          manner and execution, or validity of any instrument deposited in
          escrow, nor as to the identity, authority, or right of any person
          executing the same, and Escrow Agent's duties under this Agreement
          shall be limited to those provided in this Agreement. Without
          limitation of the foregoing, Escrow Agent shall be entitled to rely
          upon written notice from Buyer to Seller and Escrow Agent as to the
          exercise by Buyer of its right to terminate this Agreement in
          accordance with the provisions hereof, and shall release the Deposit
          to Buyer upon receipt of such notice without the written approval or
          consent of Seller.

                                       9
<PAGE>

          16.3. Indemnification. Unless Escrow Agent discharges any of its
          duties under this Agreement in a negligent manner or is guilty of
          willful misconduct with regard to its duties under this Agreement,
          SELLER and BUYER shall indemnify Escrow Agent and hold it harmless
          from any and all claims, liabilities, losses, actions, suits or
          proceedings at law or in equity, or other expenses, fees, or charges
          of any character or nature, which it may incur or with which it may be
          threatened by reason of its acting as Escrow Agent under this
          Agreement; and in such connection SELLER and BUYER shall indemnify
          Escrow Agent against any and all expenses including reasonable
          attorneys' fees and the cost of defending any action, suit or
          proceeding or resisting any claim in such capacity.

          16.4. Disputes. If the parties (including Escrow Agent) shall be in
          disagreement about the interpretation of this Agreement, or about
          their respective rights and obligations, or the propriety of any
          action contemplated by Escrow Agent, or the application of the
          Deposit, Escrow Agent shall hold the Deposit until the receipt of
          written instructions from both SELLER and BUYER, or, in the absence of
          such agreement, a final order of a court of competent jurisdiction. In
          addition, in any such event, Escrow Agent may, but shall not be
          required to, file an action in interpleader to resolve the
          disagreement. Escrow Agent shall be indemnified for all costs and
          reasonable attorneys' fees in its capacity as Escrow Agent in
          connection with any such interpleader action and shall be fully
          protected in suspending all or part of its activities under this
          Agreement until a final judgment in the interpleader action is
          received.

          16.5. Counsel. Escrow Agent may consult with counsel of its own choice
          and have full and complete authorization and protection in accordance
          with the opinion of such counsel. Escrow Agent shall otherwise not be
          liable for any mistakes of fact or errors of judgment, or for any acts
          or omissions of any kind, unless caused by its negligence or willful
          misconduct.

17.  BUYER'S DEFAULT; DAMAGES

     If BUYER shall fail to fulfill BUYER's agreements herein prior to or as of
     the closing, one-half of the Deposit made hereunder by BUYER shall be
     retained by SELLER as liquidated damages and forfeiture of one-half of the
     Deposit shall be SELLER's exclusive remedy at law and in equity for any
     default by BUYER prior to or as of the closing, and the remaining one-half
     of the Desposit shall be returned to BUYER simultaneously with delivery of
     one-half of the Deposit to SELLER. The provisions of this clause shall
     survive the delivery of the deed and shall supersede any agreement,
     obligation or legal rights of the parties that are contrary to the
     liquidation of damages provisions hereof. In the event SELLER breaches or
     fails, without legal excuse, to complete the sale of the Premises or to
     perform its obligations under this agreement, BUYER may, as its sole
     remedies therefor, either (a) terminate this agreement, and receive a
     return of the Deposit hereunder, or (b) bring an action for specific
     performance filed within thirty days following such breach.

                                       10
<PAGE>

18.  LIABILITY OF TRUSTEE, SHAREHOLDER, BENEFICIARY

     If SELLER or BUYER executes this Agreement in a representative or fiduciary
capacity, only the principal or the estate represented shall be bound, and
neither SELLER or BUYER so executing, nor any shareholder or beneficiary of any
trust, shall be personally liable for any obligation, express or implied,
hereunder.

19.  NO WARRANTIES OR REPRESENTATIONS

     BUYER acknowledges that BUYER has not been influenced to enter into this
     transaction nor has BUYER relied upon any warranties or representations
     made by SELLER. The provisions of this clause shall survive the delivery of
     the deed.

20.  CONSTRUCTION OF AGREEMENT; MISCELLANEOUS

     This instrument, executed in multiple counterparts, is to be construed as a
     Massachusetts contract, is to take effect as a sealed instrument, sets
     forth the entire contract between the parties, supersedes all prior
     agreements between SELLER and BUYER, is binding upon and inures to the
     benefit of the parties hereto and their respective heirs, devisees,
     executors, administrators, permitted successors and assigns, and may be
     canceled, modified or amended only by a written instrument executed by both
     SELLER and BUYER. BUYER shall not record or file this agreement, or a copy
     thereof, in or with the public records in which deeds are recorded or
     filed. If BUYER records or files this Agreement, the same shall constitute
     a default of BUYER hereunder. The captions and marginal notes are used only
     as a matter of convenience and are not to be considered a part of this
     Agreement or to be used in determining the intent of the parties.

21.  NOTICES

     Any notice required or desired hereunder shall be given in writing and
     shall be deemed duly delivered when deposited with a recognized overnight
     courier service, addressed as follows:

                                       11
<PAGE>

     (a) In the case of notice to SELLER:

         Quaker Fabric Corporation of Fall River
         941 Grinnell Street
         Fall River, MA 02721-5215
         Attn:  Cynthia L. Gordan, Esq., General Counsel
         Fax Number: (508) 678-2656

         with a copy to:

         Wilmer Cutler Pickering Hale and Dorr LLP
         60 State Street
         Boston, MA 02109
         Attn: Katharine E. Bachman, Esq.
         Fax Number: (617) 526-5000

     (b) In the case of notice to BUYER:

         Rosewood Management Company
         40 Mechanic Street, Suite 300
         Marlborough, MA  01752
         Attn: Robert J. Depietri, Jr.

         With a copy to:

         Barry D. Greene, Esq.
         Portnoy and Greene, P.C.
         687 Highland Avenue
         Needham, MA 02494

     (c) In case of notice to ESCROW AGENT:

         Stewart Title Guaranty Company
         99 Summer Street, 12th Floor
         Boston, MA 02110
         Attn: Marie L. Franco, Esq.
         Fax Number: (617) 737-8370

22.  INSPECTION PERIOD; AGREEMENT UPON LEASE AND LETTER OF CREDIT; AS-IS
     CONVEYANCE

     (a) BUYER shall have the period from the date of this agreement through
     5:00 pm on February 22, 2007 ("Inspection Period") to review title, survey,
     permitting, environmental, and other due diligence matters related to the
     Premises. All costs and expenses of this review shall be at the sole
     expense of the BUYER, including costs of title insurance, surveys, and
     environmental inspections. Any damage done by BUYER or BUYER's consultants
     shall be repaired by BUYER at BUYER's expense. BUYER hereby agrees to
     defend, indemnify, and hold SELLER harmless from and against any liability,
     loss, cost, or expense arising from such investigations. In no event shall
     BUYER have the right to perform any intrusive testing of the Premises
     without the consent of SELLER, which consent may be withheld by SELLER in
     its sole discretion. Prior to such entry, BUYER shall provide SELLER with a
     certificate of BUYER's or BUYER's consultants' commercial general liability
     insurance in the amount of One Million Dollars ($1,000,000) in a form
     reasonably satisfactory to SELLER, which certificate shall name SELLER as
     an additional insured. BUYER shall have the right to terminate this
     agreement by written notice to SELLER prior to the expiration of the
     Inspection Period due to BUYER's dissatisfaction with such matters, in
     BUYER's sole discretion. In the event of BUYER's election to terminate this
     Agreement prior to the expiration of the Inspection Period, and upon notice
     of such election timely given, this agreement shall be null and void and of
     no legal effect except for the immediate return of the Initial Deposit
     hereunder, and for the indemnification obligation of BUYER hereunder. If
     BUYER does not so terminate this agreement prior to expiration of the
     Inspection Period as aforesaid, this agreement shall remain in full force
     and effect, and BUYER shall have no further right to terminate this
     agreement under the provisions of this Section 22.

                                       12
<PAGE>

     (b) BUYER and SELLER shall have the period from the date of this agreement
     through the expiration of the Inspection Period to agree upon a form of
     lease ("Lease") to be entered in to by BUYER, as landlord, and SELLER, as
     tenant, with respect to the 4th and 5th floors and basement of the building
     and the shed on the premises, as well as the form of a letter of credit to
     be delivered by SELLER to BUYER as security for the Lease (the Lease and
     letter of credit are hereafter referenced as the "Lease Documents"). Each
     party shall have the right to terminate this agreement by written notice to
     the other party prior to the expiration of the Inspection Period due to an
     inability to agree upon the Lease Documents, such right to be exercised in
     the sole discretion of the terminating party. In the event of a party's
     election to terminate this Agreement hereunder prior to the expiration of
     the Inspection Period, and upon notice of such election timely given, this
     agreement shall be null and void and of no legal effect except for the
     immediate return of the Initial Deposit hereunder, and for the
     indemnification obligation of BUYER hereunder. In addition, if SELLER and
     BUYER do not agree in writing upon the Lease Documents prior to the
     expiration of the Inspection Period, then this Agreement shall
     automatically terminate without further action of the parties, and this
     agreement shall be null and void and of no legal effect, except for the
     immediate return of the Initial Deposit hereunder, and for the
     indemnification obligation of BUYER hereunder.

     (c) BUYER, on behalf of itself and its successors and assigns, hereby
     acknowledges and agrees that BUYER shall acquire the Premises in their "as
     is, with all faults" condition, and waives its right to recover from, and
     forever releases and discharges, SELLER, its shareholders, directors,
     officers, employees, attorneys and agents of each of them, and their
     respective heirs, successors, personal representatives and assigns from any
     and all demands, claims, legal or administrative proceedings, losses,
     liabilities, damages, penalties, fines, liens, judgments, costs or expenses
     known or unknown, foreseen or unforeseen, that may arise on account of or
     in any way be connected with (i) the physical condition of the Premises,
     (ii) except with respect to SELLER's warranty of title set forth in the
     Deed, the condition of title to the Premises, (iii) the presence on, under
     or about the Premises of any hazardous or regulated substance, or (iv) the
     compliance of the Premises with any applicable federal, state or local law,
     rule or regulation. The terms and provisions of this Section 22 shall
     survive Closing and/or termination of this Agreement.

                                       13
<PAGE>

23.  SELLER'S CLOSING DOCUMENTS.

     At the Closing, SELLER shall deliver to BUYER:

     (a)  the Quitclaim Deed;

     (b)  the Lease Documents;

     (c)  a parties in possession and mechanics' and materialmen's lien
          affidavit in form and substance sufficient to remove the parties in
          possession and mechanics lien exceptions from the standard ALTA title
          insurance policy;

     (d)  signed closing statement; and

     (e)  a FIRPTA Affidavit executed by SELLER in the form of Exhibit C.

24.  BUYER'S CLOSING DOCUMENTS. At the Closing, BUYER shall deliver to SELLER:

     (a)  the Lease;

     (b)  a signed closing statement; and

     (c)  The balance of the Purchase Price and other sums to be paid by BUYER
          hereunder.

                              [End of text on page]

                                       14
<PAGE>

     EXECUTED as a sealed instrument as of the day and year first above written.

SELLER:                             QUAKER FABRIC CORPORATION OF FALL RIVER,
                                    a Massachusetts corporation

                                    By:     ______/s/_________________
                                    Name:   _______________________
                                    Title:  _______________________

BUYER:                              ROSEWOOD MANAGEMENT ASSOCIATES, INC.,
                                    a Massachusetts corporation

                                    By:     ______/s/_________________
                                    Name:   _______________________
                                    Title:  _______________________

ESCROW AGENT:                       STEWART TITLE GUARANTY COMPANY

                                    By:     ______/s/_________________
                                    Name:   _______________________
                                    Title:  _______________________

                                       15
<PAGE>

                                    EXHIBIT A

                                LEGAL DESCRIPTION

                                  See attached

                                       16
<PAGE>

                                    EXHIBIT B

                                 QUITCLAIM DEED

     Quaker  Fabric  Corporation  of Fall  River,  a  Massachusetts  corporation
("Grantor"),  for  consideration  of Four Million Seven Hundred Thousand Dollars
($4,700,000.00), grants to Rosewood Management Associates, Inc., a Massachusetts
corporation, the address of which is 40 Mechanic Street, Suite 300, Marlborough,
MA 01752, with quitclaim  covenants,  that certain parcel of land, together with
all buildings and other improvements thereon and all appurtenances thereto, such
real property being known as 1082 Davol Street,  Fall River,  Massachusetts,  in
Bristol  County,  Massachusetts,  and being  bounded  and more  particularly  as
described  in Exhibit A  attached  hereto and made a part  hereof,  subject  all
easements,  agreements  and  restrictions  of  record  insofar  as in force  and
applicable.

     The real property  conveyed  hereby is the same as that acquired by grantor
by a Quitclaim  Deed dated  ____,  recorded  with the Bristol  County Fall River
District Registry of Deeds in Book ____, Page ____.

     The within  conveyance  does not constitute a sale of all or  substantially
all of the real property owned by Grantor in the Commonwealth of Massachusetts,

     IN WITNESS  WHEREOF,  this  Quitclaim  Deed has been  executed  as a sealed
instrument to be effective as of the ____ day of ____________, 2007.

                         QUAKER FABRIC CORPORATION OF FALL RIVER,
                         a Massachusetts corporation

                         By:________________________
                         Name:______________________
                         Title:_____________________

                                       17
<PAGE>

                                EXHIBIT A TO DEED

                                LEGAL DESCRIPTION

                                       18
<PAGE>

                                    EXHIBIT C

                               FIRPTA CERTIFICATE

     To inform Rosewood Management Associates, Inc., a Massachusetts corporation
("Transferee"),  that  withholding  of tax under  Section  1445 of the  Internal
Revenue Code of 1986,  as amended (the  "Code"),  will not be required  upon the
transfer of certain real property to Transferee by Quaker Fabric  Corporation of
Fall River ("Transferor"), Transferor hereby certifies the following:

     1. Transferor is not a foreign corporation,  foreign  partnership,  foreign
trust  or  foreign  estate  (as  those  terms  are  defined  in the Code and the
regulations promulgated thereunder);

     2. Transferor's U.S. employer identification number is: [__________]; and

     3.  Transferor's  office  address is 941 Grinnell  Street,  Fall River,  MA
02721-5215.

     Transferor  understands  that this  Certification  may be  disclosed to the
Internal  Revenue Service by Transferee and that any false  statement  contained
herein could be punishable by fine, imprisonment, or both.

     Under  penalty of perjury,  Transferor  declares  that it has examined this
Certification  and  that to the best of its  knowledge  and  belief  it is true,
correct and complete.

                                  Dated as of the ____ day of ___________, 2007.

                                   QUAKER FABRIC CORPORATION OF FALL RIVER,
                                   a Massachusetts corporation

                                   By:_______________________
                                   Name:_____________________
                                   Title:____________________

                                       19

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