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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) January 15, 1999.
ADAPTEC, INC.
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(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 0-15071 94-2748530
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(State of Incorporation) (Commission File (I.R.S. Employer
Number) Identification No.)
</TABLE>
691 S. MILPITAS BLVD., MILPITAS, CALIFORNIA 95035
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (408) 945-8600
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N/A
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(Former name, former address and former fiscal year,
if changed since last report)
This document consists of 8 pages, excluding exhibits, of which this is page 1.
1
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On November 6, 1998, Adaptec, Inc. ("Adaptec" or the "Company")
entered into an agreement with Texas Instruments, Incorporated ("TI"),
a Delaware Corporation, under which certain assets of the Company's
high-end Peripheral Technology Solutions ("PTS") business were
transferred to TI for approximately $8.5 million in cash, including
sales tax reimbursement of $0.2 million. The Company received cash
proceeds of approximately $4.5 million upon consummation of the asset
purchase agreement. The outstanding balance of $4.0 million is due and
payable in two equal installments scheduled for February and May of
1999.
On January 15, 1999, STMicroelectronics, Inc. ("ST"), a Delaware
corporation, acquired certain assets and obtained certain intellectual
property rights of the Company's mainstream PTS business for a purchase
price of approximately $72.1 million in cash, including sales tax
reimbursement of $0.4 million.
The substance of the two transactions was the disposal of substantially
all the assets, rights and business of the PTS business, excluding
accounts receivable.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) Financial Statements of Business Acquired: Not applicable
(b) Pro forma financial information:
INTRODUCTION TO PRO FORMA FINANCIAL INFORMATION (UNAUDITED)
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
The following unaudited Pro Forma Condensed Consolidated Balance Sheet reflects
the historical condensed consolidated balance sheet of Adaptec at December 31,
1998, adjusted to give effect to the PTS disposition as if it had occurred as of
that date.
The unaudited Pro Forma Condensed Consolidated Balance Sheet should be read in
conjunction with the historical consolidated financial statements and notes
thereto and the narrative sections included elsewhere herein. Because the sale
of assets to ST occurred subsequent to January 1, 1999, actual adjustments and
balances will vary from those presented in the Pro Forma Condensed Consolidated
Balance Sheet. However, management believes that any differences between actual
adjustments and pro forma adjustments will not have a material effect on the pro
forma financial statements.
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
The following unaudited Pro Forma Condensed Consolidated Statements of
Operations for the year ended March 31, 1998 and the nine months ended December
31, 1998 are based upon the historical condensed consolidated statements of
operations of the Company for the respective periods after giving effect to pro
forma adjustments described in the notes thereto as if the PTS disposition had
been consummated on April 1, 1997 and April 1, 1998, respectively.
The unaudited Pro Forma Condensed Consolidated Statements of Operations should
be read in conjunction with the historical consolidated financial statements and
notes thereto of the Company as previously filed in the Company's annual report
on Form 10-K and the narrative sections included elsewhere herein. The Pro Forma
Condensed Consolidated Statements of Operations are not necessarily indicative
of what actual results of operations would have been for the periods had the
transaction occurred on April 1, 1997 and April 1, 1998, respectively, and do
not purport to indicate the results of future operations.
2
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ADAPTEC, INC.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
December 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
Pro Forma
Adjustments
Reflecting
PTS
Historical Disposition As Adjusted
---------- ----------- -----------
<S> <C> <C> <C>
ASSETS
Current assets
Cash and marketable securities $ 655,554 $76,079 (A) $ 731,633
Accounts receivable, net 80,357 -- 80,357
Inventories 48,600 (2,501) (B) 46,099
Prepaid expenses and other 108,674 (4,543) (B) 104,131
---------- -------- -----------
Total current assets 893,185 69,035 962,220
Property and equipment, net 185,551 (5,699) (B) 179,852
Other assets 38,439 (4,836) (B) 33,603
---------- -------- -----------
1,117,175 58,500 1,175,675
========== ======== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long term debt $ -- $ -- $ --
Note payable -- -- --
Accounts payable 36,945 -- 36,945
Accrued liabilities 78,778 13,037 (C) 112,273
20,458 (D)
---------- -------- -----------
Total current liabilities 115,723 33,495 149,218
---------- -------- -----------
Convertible subordinated notes 230,000 -- 230,000
---------- -------- -----------
Stockholders' equity:
Common stock 108 -- 108
Additional paid-in capital 236,847 -- 236,847
Retained earnings 534,497 25,005 (E) 559,502
---------- -------- -----------
Total stockholders' equity 771,452 25,005 796,457
---------- -------- -----------
1,117,175 58,500 1,175,675
========== ======== ===========
</TABLE>
The accompanying notes are in integral part of these unaudited pro forma
condensed consolidated financial statements.
3
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ADAPTEC, INC.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
The PTS disposition pro forma adjustments have been made to reflect the
following:
(A) Consideration of $76.1 million still to be received related to the
disposition of PTS. Approximately $4.5 million relating to the sale to
TI was received in November 1998. The remaining $4.0 million which is
due in two equal installments of $2.0 million was classified in the
December 31, 1998 balance sheet as part of prepaid expenses and other.
This amount was reclassified to cash in the pro forma adjustments.
(B) Elimination of assets associated with PTS. These assets include
goodwill of $4.8 million associated with the Analog Devices, Inc.
acquisition. The goodwill was eliminated as the technology and other
intangible assets associated with this acquisition was sold to ST.
The balance of the assets eliminated relate to inventory, equipment
and other immaterial assets sold in conjunction with the sale of the
PTS business.
(C) Transaction costs associated with the PTS disposition. Transaction
costs include legal, accounting and consulting costs associated with
the sale of the PTS business as well as termination costs of employees
associated with the PTS business.
(D) Income taxes payable associated with taxing the anticipated gain at
45%. The tax rate of 45% is higher than statutory rates due to book
write-offs which were offset against sale proceeds and are not
deductible for tax purposes.
(E) Anticipated gain on PTS disposition, net of related taxes.
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ADAPTEC, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
Nine months ended December 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
Pro Forma
Adjustments
Reflecting
PTS
Historical Disposition As Adjusted
---------- ----------- -----------
<S> <C> <C> <C>
Net revenues $ 508,424 $84,791 (A) $ 423,633
Cost of revenues 217,544 59,300 (B) 158,244
---------- -------- -----------
Gross profit 290,880 25,491 265,389
---------- -------- -----------
Operating expenses:
Research and development 119,970 29,165 (C) 90,805
Sales, marketing and administrative 134,661 8,058 (D) 126,603
Write-off of acquired in-process technology 65,762 26,380 (E) 39,382
Restructuring and other charges 62,187 -- 62,187
---------- -------- -----------
Total operating expenses 382,580 63,603 318,977
---------- -------- -----------
Loss from operations (91,700) (38,112) (53,588)
Interest income 24,961 -- 24,961
Interest expense (9,106) -- (9,106)
---------- -------- -----------
Loss from operations before benefit
for income taxes (75,845) (38,112) (37,733)
Benefit for income taxes (974) (3,037) (G) 2,063
---------- -------- -----------
Net loss $ (74,871) $(35,075) $ (39,796)
========== ======== ===========
Net loss per common share:
Basic $ (0.67) $ (0.36)
========== ===========
Diluted $ (0.67) $ (0.36)
========== ===========
Shares used in computing net loss per
common share:
Basic 111,274 111,274
========== ===========
Diluted 111,274 111,274
========== ===========
</TABLE>
The accompanying notes are in integral part of these unaudited pro forma
condensed consolidated financial statements.
5
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ADAPTEC, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
Year ended March 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
Pro Forma
Adjustments
Reflecting
PTS
Historical Disposition As Adjusted
---------- ----------- -----------
<S> <C> <C> <C>
Net revenues $1,007,293 $249,786 (A) $ 757,507
Cost of revenues 391,100 135,101 (B) 255,999
---------- -------- -----------
Gross profit 616,193 114,685 501,508
---------- -------- -----------
Operating expenses:
Research and development 169,022 45,929 (C) 123,093
Sales, marketing and administrative 215,624 13,318 (D) 202,306
Write-off of acquired in-process technology -- -- (E) --
Restructuring and other charges 6,715 3,215 (F) 3,500
---------- -------- -----------
Total operating expenses 391,361 62,462 328,899
---------- -------- -----------
Income from operations 224,832 52,223 172,609
---------- -------- -----------
Interest income 32,899 -- 32,899
Interest expense (12,402) -- (12,402)
---------- -------- -----------
20,497 -- 20,497
---------- -------- -----------
Income before income taxes and cumulative
effect of a change in accounting principle 245,329 52,223 193,106
Provision for income taxes 63,452 13,758 49,694
---------- -------- -----------
Income before cumulative effect of a change
in accounting principle 181,877 38,465 143,412
Cumulative effect of a change in accounting principle (9,000) -- (9,000)
---------- -------- -----------
Net income $ 172,877 $ 38,465 $ 134,412
========== ======== ===========
Net income per common share:
Basic
Income before cumulative effect of a change
in accounting principle $ 1.61 $ 1.27
Cumulative effect of a change in accounting principle (0.08) (0.08)
---------- -----------
Net income $ 1.53 $ 1.19
========== ===========
Diluted
Income before cumulative effect of a change
in accounting principle $ 1.54 $ 1.21
Cumulative effect of a change in accounting principle (0.08) (0.08)
---------- -----------
Net income $ 1.46 $ 1.13
========== ===========
Shares used in computing net income per common share:
Basic 113,172 113,172
========== ===========
Diluted 118,432 118,432
========== ===========
</TABLE>
The accompanying notes are in integral part of these unaudited pro forma
condensed consolidated financial statements.
6
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ADAPTEC, INC.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
The PTS disposition pro forma adjustments have been made to reflect the
following:
(A) Reduction in revenues due to PTS disposition.
(B) Reduction in cost of revenues due to PTS disposition.
(C) Reduction in research and development for costs associated with PTS
operations.
(D) Reduction in sales, marketing and administrative for costs associated
with PTS operations.
(E) Reduction in write-off of in-process technology related to the Analog
Devices, Inc. acquisition as this business was included in the PTS
operations.
(F) Reduction in restructuring and other charges for costs attributable to
the PTS operations.
(G) The tax effect of pro forma adjustments are at the Company's effective
tax rates in effect during those periods, net of book write-offs for
which no tax benefit is derived.
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ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION
AND EXHIBITS (CONT.)
(c) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
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<S> <C>
2.1 Asset Purchase Agreement between Texas Instruments, Incorporated
and Adaptec, Inc. dated November 6, 1998.
2.2 Asset Acquisition Agreement among Adaptec, Inc., Adaptec Mfg.(s)
Pte. Ltd. and ST Microelectronics, Inc. dated January 15, 1999.
2.3 Amendment No. 1 to Asset Acquisition Agreement among Adaptec,
Inc., Adaptec Mfg.(s) Pte. Ltd. and ST Microelectronics, Inc.
dated January 15, 1999.
99.1 Press release dated January 18, 1999 with respect
to the sale of the Peripheral Technology Solutions business.
</TABLE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: January 15, 1999 ADAPTEC, INC.
By: \s\ANDREW J. BROWN
-------------------------------------
Andrew J. Brown, Vice-President
and Chief Financial Officer
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Exhibit 2.1
ASSET PURCHASE AGREEMENT
between
TEXAS INSTRUMENTS INCORPORATED
and
ADAPTEC, INC.
November 6, 1998
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TABLE OF CONTENTS
<TABLE>
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Page
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<S> <C>
I. DEFINITIONS 4
1.1 DEFINITIONS 4
II. PURCHASE OF ASSETS 4
2.1 PURCHASE AND SALE OF ASSETS 4
(a) Product Designs 4
(b) Tangible Assets 4
(c) Technology Deliverables 4
(d) Intangible Assets 4
(e) Contracts 5
(f) Books and Records 5
(g) Inventory 5
2.2 EXCLUDED ASSETS 5
2.3 NONASSIGNABLE CONTRACTS 5
(a) Nonassignability 5
(b) Seller to Use Reasonable Efforts 5
(c) If Waivers or Consents Cannot Be Obtained 6
(d) Cooperation of Purchaser 6
2.4 RESERVATION OF RIGHTS 6
III. ASSUMPTION OF LIABILITIES 6
3.1 ASSUMED LIABILITIES 7
3.2 RETAINED LIABILITIES 7
IV. PURCHASE PRICE 7
4.1 PURCHASE PRICE 7
4.2 ALLOCATION OF PURCHASE PRICE 7
4.3 LICENSE FEES AND ROYALTIES 8
V. CLOSING 8
5.1 CLOSING 8
5.2 DELIVERIES AT CLOSING 8
5.3 DELIVERY OF PURCHASED ASSETS 9
VI. REPRESENTATIONS AND WARRANTIES OF SELLER 9
6.1 ORGANIZATION AND GOOD STANDING 9
6.2 AUTHORIZATION AND EFFECT OF AGREEMENT 10
6.3 NO CONFLICTS 10
6.4 NO THIRD PARTY OPTIONS 10
6.5 INTELLECTUAL PROPERTY 10
(a) Ownership 10
(b) No Infringement 11
(c) Effective Transfer of Rights 11
(d) No Infringement by Third Parties 11
6.6 LITIGATION 11
6.7 TITLE TO AND CONDITION OF ASSETS 11
6.8 PRODUCTS 12
6.9 CONTRACTS 12
6.10 CUSTOMERS 12
</TABLE>
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<TABLE>
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Page
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6.11 YEAR 2000 COMPLIANCE 12
6.12 DISCLOSURE 12
VII. REPRESENTATIONS AND WARRANTIES OF PURCHASER 13
7.1 CORPORATE ORGANIZATION 13
7.2 AUTHORIZATION AND EFFECT OF AGREEMENT 13
7.3 NO CONFLICTS 13
7.4 LITIGATION 13
VIII. COVENANTS 14
8.1 COVENANT NOT TO COMPETE 14
8.2 CONFIDENTIALITY 14
8.3 SPECIFIC PERFORMANCE 15
8.4 PRODUCT WARRANTY MATTERS 15
8.5 MAINTENANCE OF BOOKS AND RECORDS 16
8.6 MANUFACTURING SUPPORT 16
8.7 MISCELLANEOUS EMPLOYEE MATTERS 17
IX. SURVIVAL AND INDEMNIFICATION 17
9.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS 17
9.2 LIMITATIONS ON LIABILITY 17
9.3 INDEMNIFICATION 18
9.4 DEFENSE OF CLAIMS 18
9.5 EXCLUSIVE REMEDY 20
X. MISCELLANEOUS PROVISIONS 20
10.1 NOTICES 20
10.2 EXPENSES 21
10.3 SUCCESSORS AND ASSIGNS 21
10.4 WAIVER 21
10.5 ENTIRE AGREEMENT; DISCLOSURE SCHEDULES 21
10.6 AMENDMENTS, SUPPLEMENTS, ETC 21
10.7 RIGHTS OF THE PARTIES 22
10.8 FURTHER ASSURANCES 22
10.9 APPLICABLE LAW 22
10.10 EXECUTION IN COUNTERPARTS 22
10.11 TITLES AND HEADINGS 22
10.12 INVALID PROVISIONS 22
10.13 BULK SALES 22
10.14 TRANSFERS 22
10.15 TRANSFER TAXES 23
10.16 BROKERS 23
10.17 ATTORNEYS' FEES 23
10.18 DISPUTE RESOLUTION 23
</TABLE>
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ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (this "Agreement") is made and entered
into as of November 6, 1998, by and between Texas Instruments Incorporated, a
Delaware corporation ("Purchaser"), and Adaptec, Inc., a Delaware corporation
("Seller").
RECITALS:
WHEREAS, Seller desires to sell and Purchaser desires to purchase
certain assets of Seller related to the products and products under development
of Seller listed on Schedule 1 hereto (the "Products"), all on the terms and
subject to the conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants,
representations, warranties and agreements herein contained, the parties hereto
agree as follows:
I. DEFINITIONS
1.1 Definitions. As used in this Agreement, unless the context otherwise
requires, capitalized terms shall have the meanings set forth on Exhibit A
hereto.
II. PURCHASE OF ASSETS
2.1 Purchase and Sale of Assets. On the terms and subject to the
conditions hereof, at the Closing (as defined in Section 5.1), Seller will sell,
transfer, convey, assign and deliver, and Purchaser will purchase and accept,
all of Seller's right, title and interest (subject to Section 2.4) in and to the
rights, properties and assets described in this Section 2.1 (collectively, the
"Assets"), free and clear of all Liens except Permitted Liens:
(a) Product Designs. All right, title and interest of Seller in and
to the Product Designs and the custom analog cells identified on Schedule 2.1(a)
that are used exclusively in the Products;
(b) Tangible Assets. The tangible personal property assets of Seller
identified on Schedule 2.1(b) hereto (the "Tangible Assets");
(c) Technology Deliverables. The design and layout databases for
Products and other technology deliverables identified on Schedule 2.1(c) (the
"Technology Deliverables");
(d) Intangible Assets. The intangible assets, properties and rights
of Seller listed on Schedule 2.1(d) including the Intellectual Property Rights
therein and thereto, all rights to enforce such Intellectual Property Rights,
and all causes of action and rights of
<PAGE> 5
recovery for past infringement of such Intellectual Property Rights (the
"Intangible Assets"). "Intellectual Property Rights" shall mean all domestic and
foreign letters patent, patents, patent applications, invention disclosures,
copyrights, trade secrets, mask rights, technical knowledge and know-how;
(e) Contracts. Subject to Section 2.3, all rights and incidents of
interest of Seller in and to (i) all purchase orders for the purchase of the
2399 Product outstanding at the time of Closing and entered into in the ordinary
course of business consistent with past practice and (ii) each other Contract
identified on Schedule 2.1(e) (collectively, the "High-End Contracts");
(f) Books and Records. All the books and records of Seller which
relate to product engineering, research and development, and manufacture,
marketing and sale of Products, including, without limitation, customer lists,
backlog information, distributor resale data, internal price books, delivery
performance information, and all outstanding Product price quotes, but only to
the extent that such books and records do not also relate to other products or
products under development of Seller; and
(g) Inventory. Solely with respect to the 2399 Product, the (i)
tested wafers, (ii) assembled untested units and (iii) finished goods inventory
indicated on Schedule 2.1(g) (the "Inventory").
2.2 Excluded Assets. No rights, properties or assets of Seller shall be
included in the Assets except to the extent expressly referenced in Section 2.1.
The Assets shall in no event include (i) any cash or cash equivalents, accounts
receivable, bank accounts or securities, (ii) any insurance policies of Seller,
(iii) claims for refunds of taxes paid by Seller prior to the Closing Date, (iv)
any assets of, or held by or with respect to, any employee benefit plan (whether
or not governed by ERISA) or any trust, fund or account that is related to any
such employee benefit plan or that is similar in purpose or function thereto,
(v) any Product or Product component inventories (other than as specified in
Section 2.1(g) above), (vi) any title or interest in the name "Adaptec, Inc." or
any of Seller's monograms, logos, trademarks (other than with respect to part
numbers as described on Schedule 2.1(d)), trade names, service marks or any
variations or combinations thereof, (vii) any of the Adaptec Technology, Adaptec
Technology Property, Adaptec Patents or Adaptec Trademarks or (viii) any of the
assets listed on Schedule 2.2.
2.3 Nonassignable Contracts.
(a) Nonassignability. To the extent that any High-End Contract to be
assigned pursuant hereto is not capable of being assigned without the consent,
approval or waiver of a third person or entity, nothing in this Agreement will
constitute an assignment or require the assignment thereof except to the extent
provided in this Section 2.3.
(b) Seller to Use Reasonable Efforts. Notwithstanding anything
contained in this Agreement to the contrary, Seller will not be obligated to
assign to Purchaser any of its rights and obligations in and to any of the
High-End Contracts referred to in Section 2.3(a)
5
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without first having obtained all consents, approvals and waivers necessary for
such assignment; provided, however, that Seller shall use reasonable commercial
efforts to obtain all such consents, approvals and waivers prior to and after
the Closing Date (as defined in Section 5.1).
(c) If Waivers or Consents Cannot Be Obtained. To the extent that
the consents, approvals and waivers referred to in Section 2.3(a) are not
obtained by Seller, Seller shall use reasonable commercial efforts to (a)
provide to Purchaser the financial and business benefits of any High-End
Contract referred to in Section 2.3(a) and (b) and enforce, at the request and
expense of Purchaser, for the account of Purchaser, any rights of Seller arising
from any such High-End Contract (including without limitation the right to elect
to terminate such High-End Contract in accordance with the terms thereof upon
the advice of Purchaser).
(d) Cooperation of Purchaser. Purchaser agrees to cooperate with
Seller and supply relevant information to Seller or such third person or entity
in order to assist Seller in its obligations under this Section 2.3.
Notwithstanding the foregoing, nothing contained herein shall obligate Seller or
Purchaser to expend or pay any amount to third parties to obtain any consents,
approvals or waivers.
2.4 Reservation of Rights. (a) Seller hereby reserves for itself, and
Purchaser hereby grants to Seller, (i) the right to use the Assets without
charge by Purchaser (provided, however, that such right shall not be exercisable
in such a manner as to interfere unreasonably with the normal operations and
business of Purchaser), and (ii) an irrevocable, nonexclusive, royalty-free,
worldwide license to the Assets, in each case, for the limited purposes of
making, using and selling current Products (other than the 2399 Product) through
their "end-of-life" during the period from the Closing to March 31, 1999.
(b) Seller hereby reserves for itself, and Purchaser hereby grants
to Seller, the irrevocable, perpetual, fully-paid and royalty-free, worldwide
right to use and reproduce the custom analog cells identified in Schedule 2.1(a)
for the sole purpose of developing derivative works that are designs and
circuits for semiconductor devices having geometries other than 0.35 micron.
Seller and Purchaser agree that Seller will own all right, title and interest in
and to any and all intellectual property created by or for Seller in the
development of such derivative works, including all rights of ownership therein
and thereto; except that Seller will not have the right to develop, or authorize
third persons to develop, derivative works that are designs or circuits for
semiconductor devices having 0.35 micron geometries. Nothing in this Agreement
is intended to preclude Seller from independently developing analog and other
cells and technology without reference to Assets assigned to Purchaser
hereunder. Purchaser shall otherwise have all right, title and interest
including intellectual property rights (but specifically excluding patents and
related patent rights) in and to the custom analog cells identified in Schedule
2.1(a) having 0.35 micron geometries; and nothing in this Agreement or in the IP
Agreement is intended to preclude Purchaser from developing analog and other
cells with reference to those cells.
III. ASSUMPTION OF LIABILITIES
6
<PAGE> 7
3.1 Assumed Liabilities. As of the Closing, Purchaser will assume and
thereafter, in due course, pay and fully satisfy the following liabilities and
obligations of Seller (the "Assumed Liabilities") and no other liabilities or
obligations:
(a) all liabilities and obligations for product warranty claims
arising from the 2399 Products produced or sold by Seller prior to Closing, but
not to exceed $20,000 in the aggregate; and
(b) all liabilities and obligations of Seller under the High-End
Contracts to the extent assigned to Purchaser, or if not so assigned, to the
extent Purchaser has received the financial and business benefits thereof
pursuant to Section 2.3(c), but in any event excluding any obligations arising
from a breach of any High-End Contract prior to Closing.
3.2 Retained Liabilities. Notwithstanding anything contained in this
Agreement to the contrary, Purchaser does not assume or agree to pay, satisfy,
discharge or perform, and will not be deemed by virtue of the execution and
delivery of this Agreement or any document delivered at the Closing pursuant to
this Agreement, or as a result of the consummation of the transactions
contemplated by this Agreement, to have assumed, or to have agreed to pay,
satisfy, discharge or perform, any liability, obligation or indebtedness of
Seller other than the Assumed Liabilities (such liabilities and obligations
retained by Seller being referred to herein as the "Retained Liabilities").
Without limiting the foregoing, Seller acknowledges and confirms that all
liabilities and obligations for product warranty claims arising from Seller's
manufacture or sale of current Products (other than the product warranty
obligations in respect of the 2399 Products expressly assumed pursuant to
Section 3.1(a)) constitute Retained Liabilities. It is specifically agreed that
Seller shall remain liable for all the Retained Liabilities and Seller agrees to
discharge the Retained Liabilities as and when the same become due and payable
and to promptly discharge any action or claim in respect thereof.
IV. PURCHASE PRICE
4.1 Purchase Price. In consideration of the conveyance to Purchaser of
the Assets and the other rights granted to Purchaser pursuant hereto and subject
to the conditions and in accordance with terms hereof, Purchaser shall (a) pay
to Seller $8,313,403.80, payable in installments on the dates specified below
(the "Purchase Price"), and (b) assume the Assumed Liabilities. At the Closing,
Purchaser will pay $4,313,403.80 of the Purchase Price ($313,403.80 of which is
attributable to the Inventory) to Seller (the "Closing Date Payment") and
Purchaser will assume the Assumed Liabilities. On the date three months after
the Closing Date, Purchaser will pay to Seller an additional $2,000,000 of the
Purchase Price. On the date six months after the Closing Date, Purchaser will
pay to Seller the remaining $2,000,000 of the Purchase Price.
4.2 Allocation of Purchase Price. Purchaser and Seller agree to consult
with each other with respect to the allocation of the Purchase Price and Assumed
Liabilities to the Assets
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for tax purposes; provided, however, that nothing contained herein shall be
deemed to obligate either Purchaser or Seller to reach agreement with respect to
such allocation.
4.3 License Fees and Royalties. In addition to the foregoing, the
Purchaser will pay Seller license fees and royalties in accordance with the
terms of the IP Agreement (the "License Fees and Royalties").
V. CLOSING
5.1 Closing. The consummation of the transactions contemplated hereby
(the "Closing") shall take place at the offices of Seller, 691 South Milpitas
Boulevard, Milpitas, California, on November 6, 1998 (the "Closing Date"),
immediately following the execution and delivery of this Agreement.
5.2 Deliveries at Closing. At the Closing:
(a) Seller shall deliver to Purchaser the items described in clauses
(i) through (vi) below:
(i) a Bill of Sale, substantially in the form attached hereto as
Exhibit B (the "Bill of Sale"), executed by Seller;
(ii) an Assignment of Contracts, substantially in the form
attached hereto as Exhibit C (the "Assignment of Contracts"), executed by
Seller;
(iii) the High End Disk Drive Electronics Technology License
Agreement, substantially in the form attached hereto as Exhibit D (the "IP
Agreement"), executed by Seller;
(iv) the Occupancy License Agreement, substantially in the form
attached hereto as Exhibit E (the "Sublease Agreement"), executed by Seller;
(v) all third party consents identified on Schedule 5.2(v)
hereto; and
(vi) evidence that the party signing on behalf of Seller is
authorized to do so.
(b) Purchaser shall deliver to Seller the items described in clauses
(i) through (vi) below:
(i) the Closing Date Payment by wire transfer of immediately
available funds to the account designated by Seller no later than two Business
Days prior to Closing;
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(ii) an Assumption of Liabilities Agreement pursuant to which
Purchaser assumes at Closing the Assumed Liabilities, substantially in the form
attached hereto as Exhibit F (the "Assumption Agreement"), executed by
Purchaser;
(iii) the IP Agreement, executed by Purchaser;
(iv) the Sublease Agreement, executed by Purchaser;
(v) evidence that the party signing on behalf of Purchaser is
authorized to do so; and
(vi) the amount of $229,899.33, representing the Transaction
Taxes collectible by Seller pursuant to Section 10.15.
(c) The Bill of Sale, Assignment of Contracts, IP Agreement,
Sublease Agreement and Assumption Agreement shall constitute, collectively, the
"Collateral Agreements."
5.3 Delivery of Purchased Assets. Title to the Assets passes to
Purchaser as of the Closing at the applicable places of business of Seller.
Promptly following the Closing, Seller will place Purchaser in full possession
and control of the Assets and all other information to be provided in accordance
with the terms of the IP Agreement, provided, however, that Seller need not
deliver the Inventory to be transferred to Purchaser pursuant to Section 2.1(g)
prior to November 7, 1998, and, provided further that, to the extent that the
Inventory actually delivered by Seller differs from the amounts described on
Schedule 2.1(g), Purchaser or Seller, as the case may be, will make a payment to
the other (promptly following such delivery) reflecting the increase or
decrease, respectively, in the amount of Inventory so delivered (with such
payment to be calculated pro rata on the basis of $313,403.80 allocated to the
Inventory described on Schedule 2.1(g)). All information capable of electronic
transmission will be transmitted to Purchaser in such manner. All other assets
and information (other than Assets to remain on the premises of Seller during
the term of the Sublease Agreement) will be delivered by Seller to the business
locations of Purchaser designated by Purchaser by means of delivery reasonably
designated by Purchaser, but at Seller's cost and risk of loss.
VI. REPRESENTATIONS AND WARRANTIES OF SELLER
Seller makes the following representations and warranties to Purchaser,
each of which shall be true and correct (except as set forth in the Disclosure
Schedule attached hereto as Schedule 6) as of the date hereof and shall be
unaffected by any investigation heretofore or hereafter made.
6.1 Organization and Good Standing. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has the
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requisite corporate power and authority to own, lease or otherwise hold its
properties and assets and to carry on its business as presently conducted.
6.2 Authorization and Effect of Agreement. Seller has the requisite
corporate power and authority to execute and to deliver this Agreement and to
perform the transactions contemplated hereby. The execution and delivery by
Seller of this Agreement and the performance by it of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of Seller. This Agreement has been duly executed and delivered by
Seller and constitutes a valid and binding agreement of Seller, enforceable
against Seller in accordance with its terms, subject to applicable bankruptcy,
reorganization, moratorium, and similar laws affecting creditors' rights and
remedies generally and subject, as to enforceability, to general principles of
equity. Each of the Collateral Agreements, when executed and delivered by Seller
at Closing, will constitute a valid and binding agreement of Seller, enforceable
against Seller in accordance with its terms, subject to applicable bankruptcy,
reorganization, moratorium, and similar laws affecting creditors' rights and
remedies generally and subject, at to enforceability, to general principles of
equity.
6.3 No Conflicts. The execution and delivery of this Agreement and the
Collateral Agreements by Seller does not, and the performance by Seller of the
transactions contemplated by this Agreement and the Collateral Agreements will
not, (i) give rise to the creation of a Lien upon any of the Assets (other than
in favor of Purchaser or as explicitly contemplated by this Agreement or the
Collateral Agreements), (ii) give rise to a right of termination, cancellation
or acceleration of any material obligation or to a loss of a material benefit
under any of the High-End Contracts, or (iii) conflict with, or result in any
violation of, or constitute a default under or (a) any provision of the
Certificate of Incorporation or Bylaws of Seller, (b) any of the terms,
conditions or provisions of any Contract by which any of the Assets are bound,
or (c) any Law or Order applicable to or binding on Seller or the Assets. Except
as set forth on Schedule 6.3 hereto, no Consent is required to be obtained, made
or given (whether pursuant to applicable Law, Contract or otherwise) in
connection with the execution and delivery of this Agreement by Seller or the
performance by Seller of the transactions contemplated hereby.
6.4 No Third Party Options. Except as may be set forth in the High-End
Contracts to which Western Digital Corporation is a party, there are no existing
agreements, options or commitments granting to any Person the right to acquire
any of the Assets or any material interest therein.
6.5 Intellectual Property.
(a) Ownership. Seller owns or possesses licenses or other rights to
use the Product Designs, the Intangible Assets and the Technology Deliverables
and the Adaptec Technology, Adaptec Technology Property, Adaptec Patents and
Adaptec Trademarks (collectively referred to as "Proprietary Rights") and has
the rights to sell, assign, transfer, license and deliver, as applicable, such
Proprietary Rights to Purchaser as contemplated in this Agreement and the IP
Agreement without any required consent of any third party other than those
identified on Schedule 6.3 hereto, each of which required consents that are also
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identified on Schedule 5.2(v) has been previously secured. Neither Seller nor
any subsidiary of Seller has granted to any third party any license or other
right to use any of the Proprietary Rights that are to be sold to Purchaser
hereunder. With respect to Proprietary Rights that are to be exclusively
licensed to Purchaser under the IP Agreement, neither Seller nor any subsidiary
of Seller has granted to any third party any license or other right to use such
exclusively licensed Proprietary Rights within Purchaser's Exclusive Field of
Use (as defined in the IP Agreement). Seller has not asserted and does not
assert any trade dress rights with respect to the packaging of any Product.
(b) No Infringement. Except as set forth on the Disclosure Schedule,
to the knowledge of Seller, the Proprietary Rights do not conflict with or
infringe, and no one has asserted to Seller that such rights conflict with or
infringe, any proprietary rights of any third party. Except as set forth on the
Disclosure Schedule, there are no claims, disputes, actions, proceedings, suits
or appeals pending against Seller with respect to any Proprietary Rights, and to
the knowledge of Seller, none has been threatened against Seller. Except as set
forth on the Disclosure Schedule, to the knowledge of Seller, there are no facts
or alleged facts which would reasonably serve as a basis for any claim that
Seller does not have the right to use, free of any rights or claims of others,
all Proprietary Rights in the design, development, manufacture, use, sale and
other disposition of any or all of the Products.
(c) Effective Transfer of Rights. Pursuant to this Agreement and the
documents, instruments and agreements contemplated hereby, Seller will, as
applicable, (i) license the Adaptec Technology, Adaptec Technology Property,
Adaptec Patents and Adaptec Trademarks and (ii) transfer good title to the
Product Designs, Intangible Assets and Technology Deliverables to Purchaser.
Schedule 6.5(c) sets forth and summarizes each material Intellectual Property
Right in connection with the development, manufacture, use or sale of the
Products that a third party owns and that Seller uses pursuant to a license,
sublicense, agreement or other permission, except for licenses entered into in
the ordinary course of its business or standard "shrink-wrap" licenses for
off-the-shelf software products.
(d) No infringement by Third Parties. To Seller's knowledge, the
Proprietary Rights sold to Purchaser hereunder or exclusively licensed to
Purchaser under the IP Agreement are not infringed by any third party, and
Seller has not asserted against any third party that such rights are infringed
by such third party.
6.6 Litigation. There are no judicial or administrative actions,
proceedings or investigations pending or, to Seller's knowledge, threatened that
question the validity of this Agreement or any action taken or to be taken by
Seller in connection with this Agreement. There are no lawsuits, claims,
administrative or other proceedings or investigations (to which Seller is a
party or is subject) relating to or adversely affecting the Assets pending, or,
to Seller's knowledge, threatened against Seller. There are no judgments, orders
or decrees of any Governmental Authority binding on Seller that relate to or
adversely affect the Assets.
6.7 Title to and Condition of Assets. Seller has, and at Closing, Seller
will convey to Purchaser, good, valid and indefeasible title to the Assets, free
and clear of all Liens other than Permitted Liens. All of the Tangible Assets
are in good operating condition and repair,
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subject to normal wear, are usable in the regular and ordinary course of
business and conform to all applicable Laws.
6.8 Products. (a) Schedule 6.8(a) sets forth, or provides references to,
the terms and conditions of all product warranties and intellectual property
indemnities extended by the Seller to purchasers of the Products during the
preceding three years (or, if shorter, during the period that Seller has sold a
given Product).
(b) Schedule 6.8(b) sets forth Seller's product warranty, product
return and product liability experience for the Products during the twelve month
period ending September 30, 1998 (or, if shorter, during the period that Seller
has sold a given Product).
(c) The 2399 Product finished goods inventory set forth on Schedule
2.1(g) hereto is free of defects in material and workmanship and meets all
applicable customer specifications. The 2399 Product tested wafer and assembled
untested units inventory set forth on Schedule 2.1(g) hereto is of a quality and
condition usable in the ordinary course of business, provided, however, that
Seller represents and warrants, as to the usable yield with respect to such
inventories, only that Seller has no reason to believe that such usable yields
will differ materially from the usable yields previously experienced by Seller
for such 2399 Product.
6.9 Contracts. Seller has provided Purchaser with a complete copy of
each of the High-End Contracts. To Sellers knowledge, the High-End Contracts are
valid and enforceable in accordance with their terms. Seller is not, and to
Seller's knowledge, no other party thereto is, in material default in the
performance, observance or fulfillment of any obligation under the High-End
Contracts, and no event has occurred which with or without the giving of notice
or lapse of time, or both, would constitute a material default thereunder.
Except as listed on Schedule 6.3 hereto, none of the High-End Contracts requires
the consent of any party to its assignment in connection with the transactions
contemplated hereby.
6.10 Customers. Schedule 6.10 hereto set forth a list of each purchaser
of Products during the twelve months ending September 30, 1998, showing the
approximate total sales (expressed in dollars), by Product, to each such
customer during the twelve months ending September 30, 1998.
6.11 Year 2000 Compliance. The Products are not Date-Sensitive Systems.
For purposes of this Agreement "Date-Sensitive System" means any software,
microcode, or hardware system or component, including any electronic or
electronically controlled system or component, that processes any data that
includes date information or which is otherwise derived from, dependent on or
related to date information.
6.12 Disclosure. The representations and warranties of Seller contained
herein, and the statements of Seller contained in any document or other
instrument to be furnished by Seller to Purchaser in connection with the
transactions contemplated hereby, when taken together, do not contain any untrue
statement of a material fact or omit to state a material fact
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necessary to make the representations, warranties and statements so made, in
the light of the circumstances under which they were made, not misleading.
VII. REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby makes the following representations and warranties to
Seller, each of which shall be true and correct as of the date hereof and shall
be unaffected by any investigation heretofore or hereafter made.
7.1 Corporate Organization. Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has the requisite corporate power and authority to own, lease or otherwise
hold its properties and assets and to carry on its business as presently
conducted.
7.2 Authorization and Effect of Agreement. Purchaser has the requisite
corporate power and authority to execute and deliver this Agreement and to
perform the transactions contemplated hereby. The execution and delivery by
Purchaser of this Agreement and the performance by it of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of Purchaser. This Agreement has been duly executed and delivered by
Purchaser and constitutes a valid and binding agreement of Purchaser,
enforceable against Purchaser in accordance with its terms, subject to
applicable bankruptcy, reorganization, moratorium and similar laws affecting
creditors' rights and remedies generally and subject, as to enforceability, to
general principles of equity. Each of the Collateral Agreements, when executed
and delivered by Purchaser at Closing, will constitute a valid and binding
agreement of Purchaser, enforceable against Purchaser in accordance with its
terms, subject to applicable bankruptcy, reorganization, moratorium, and similar
laws affecting creditors' rights and remedies generally and subject, as to
enforceability, to general principles of equity.
7.3 No Conflicts. The execution and delivery of this Agreement and the
Collateral Agreements by Purchaser does not, and the performance by Purchaser of
the transactions contemplated by this Agreement and the Collateral Agreements
will not, conflict with, or result in any violation of, or constitute a default
under (a) any provision of the Certificate of Incorporation or Bylaws of
Purchaser, (b) any of the terms, conditions, or provisions of any agreement or
other document by which Purchaser is bound, or (c) any Law or Order applicable
to or binding on Purchaser. No Consent is required to be obtained, made or given
(whether pursuant to applicable Law, Contract or otherwise) in connection with
the execution and delivery of this Agreement by Purchaser or the performance by
Purchaser of the transactions contemplated hereby.
7.4 Litigation. There are no judicial or administrative actions,
proceedings or investigations pending or, to Purchaser's knowledge, threatened
that question the validity of this Agreement or any action taken or to be taken
by Purchaser in connection with this Agreement.
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VIII. COVENANTS
8.1 Covenant Not to Compete. (a) Seller agrees that prior to the second
anniversary of the Closing Date, neither Seller nor any entity that is
majority-owned or controlled by Seller will own a 20% or greater equity interest
in, or manage, operate, control or participate in the management, operation or
control of, any business, whether in corporate, proprietorship or partnership
form or otherwise, engaged in the design, development, manufacturing, marketing
or sale of products or components for High-End Applications, provided, however,
that Seller will otherwise retain all rights to design, develop, manufacture,
market, sell, license, lease or otherwise exploit all of the Adaptec Technology,
Adaptec Technology Property, Adaptec Patents and Adaptec Trademarks (subject to
the exclusive licenses granted with respect to portions of the Adaptec
Technology Property in the IP Agreement).
(b) Notwithstanding the foregoing, Seller may, (A) exercise its
rights under Section 2.4 to make, use and sell the current Products (other than
the 2399 Product) through their "end-of-life", and (B) in connection with the
sale and/or license of all or substantially all of the remaining assets in its
peripheral technology solutions business unit, receive, own, and exercise all
rights pursuant to, any minority (20% or less) equity interest in a purchaser or
licensor of such technology and/or business. In no event shall any of (i) such
ownership, (ii) the exercise of any rights pursuant to such ownership, or (iii)
any subleases or short-term (one year or less) manufacturing, supply or other
commercial agreements entered into and performed by Seller and such purchaser or
licensor in connection with, and related to the assets or business that are the
subject of, such sale and/or license, constitute a violation of Section 8.1(a),
regardless of the business activities of such purchaser or licensor.
8.2 Confidentiality. (a) Seller and Purchaser agree that from and after
the Closing, Seller and Purchaser will continue to be bound by the terms of that
certain undated Master Mutual Nondisclosure Agreement between the parties signed
on or about September 14, 1998 (the "NDA"), provided however, that any
confidential information sold by Seller to Purchaser hereunder or disclosed in
connection with, or pursuant to, this Agreement or the IP Agreement, shall be
subject to the terms of Section 8.2(b) of this Agreement in lieu of being
subject to the NDA.
(b) Each party agrees that (i) it will not use any Confidential
Information of the other party except as expressly permitted under this
Agreement or the IP Agreement, and (ii) it will maintain all Confidential
Information of the other party in strict confidence and will not disclose the
other party's Confidential Information to any third parties except to employees
and consultants with a bona fide need to know, provided that each such employee
and consultant is subject to written nondisclosure and limited use restrictions
at least as protective as those set forth herein. Each party will use its best
efforts to prevent inadvertent disclosure, publication or dissemination of any
of the other party's Confidential Information and will promptly notify the other
party in writing of any actual or suspected unauthorized use or disclosure of
its Confidential Information. For purposes of this Section 8.2, "Confidential
Information" shall mean any confidential information sold by Seller to Purchaser
hereunder or disclosed in connection with, or pursuant to, this Agreement or the
IP Agreement, including, without
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limitation, methods of operation, customers, and customer lists, products,
proposed products, former products, prices, fees, costs, plans, designs,
technology, inventions, trade secrets, know-how, software, marketing methods,
policies, plans, personnel, suppliers, competitors, markets or other specialized
information or proprietary matters. The term Confidential Information does not
include, and there shall be no obligation hereunder with respect to, information
that (i) is generally available to the public on the date of this Agreement,
(ii) becomes generally available to the public through no fault or breach of the
receiving party, (iii) is independently developed by the receiving party without
use of or reference to any Confidential Information of the disclosing party, as
established by documentary evidence or (iv) the receiving party rightfully
obtains from other sources without restriction on use or disclosure (where such
sources have not violated any confidentiality obligations to the disclosing
party). A party shall not have any obligation to keep confidential any
Confidential Information of the other party if and to the extent disclosure
thereof is specifically required by Law; provided, however, that in the event
disclosure is required by applicable Law, such party shall, to the extent
reasonably possible, provide such other party with prompt notice of such
requirement prior to making any disclosure so that such other party may seek an
appropriate protective order.
8.3 Specific Performance. The parties hereto specifically acknowledge
and agree that the remedy at law for any breach of Section 8.1 or 8.2 will be
inadequate and that Purchaser, in addition to any other relief available to it,
shall be entitled to temporary and permanent injunctive relief without the
necessity of proving actual damage.
8.4 Product Warranty Matters. Seller acknowledges that it has retained
liability for certain Product warranty claims pursuant to Section 3.2. Purchaser
will address and remedy all product warranty claims asserted following the
Closing Date with respect to the 2399 Products produced or sold by Seller prior
to Closing. Subject to the limitations in Section 9.2, Seller will reimburse
Purchaser for all costs and expenses in excess of $20,000 in the aggregate
incurred in remedying such product warranty claims. All such sums shall be
payable within 30 days following receipt of Purchaser's invoice and shall
thereafter bear interest at ten percent per annum until paid. For a period of
two years following the Closing, Purchaser will provide all technical and
manufacturing support to Seller (the "Support") reasonably requested by Seller
in connection with both (i) Seller's exercise of its rights under Section 2.4 to
make, use and sell the current Products (other than the 2399 Product) through
their "end-of-life" and (ii) addressing and remedying all product warranty
claims asserted with respect to all Products produced or sold by Seller (other
than the 2399 Products). Purchaser will record all of its out-of-pocket expenses
incurred by Purchaser directly attributable to providing the Support and the
time spent by its technical personnel providing the Support at a rate of $100
per hour (the "Recorded Expenses"). The Support will be provided by Purchaser
free of any charge to Seller provided that the Recorded Expenses for the first
three-month period following the Closing, the second three-month period
following the Closing, and each subsequent three month period, do not exceed,
$15,000, $10,000 and $5,000, respectively. In the event that the Recorded
Expenses with respect to a given three-month period exceed the applicable limit
in the preceding sentence, then Seller will pay to Purchaser the full amount of
the Recorded Expenses for that three-month period only.
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8.5 Maintenance of Books and Records. (a) Each of Seller and Purchaser
shall preserve until the seventh anniversary of the Closing Date all records
possessed by such party relating to the Assets. After the Closing Date, if it is
reasonably necessary that any party hereto or any successors be furnished with
additional information relating to the Assets in order properly to prepare
documents required to be filed with a Governmental Authority (including Tax
authorities) or such party's financial statements, then the other party shall
provide such party with reasonable access, upon prior reasonable written request
specifying the need therefor, during regular business hours, to (i) the relevant
employees of such other party and (ii) the books of account and records of such
other party, but, in each case, only to the extent relating to the Assets, and
such party and its representatives shall have the right to make copies of such
books and records; provided, however, that the foregoing right of access shall
not be exercisable in such a manner as to interfere unreasonably with the normal
operations and business of such other party.
(b) After the Closing Date, upon the request of Purchaser, Seller
will promptly provide Purchaser with a copy of any records possessed by Seller
as of this date which are material to the commercialization of the Products by
Purchaser. After the Closing Date, to the extent that it is reasonably necessary
in order to prepare documents to be filed with the PTO (i) with respect to the
patents (including those identified as "in process") listed on Schedule 2.1(d),
Seller shall provide Purchaser with reasonable access to the inventors of the
subject of such patents provided that such inventors remain in the employ of
Seller, and (ii) with respect to the patents (including those identified as "in
process") licensed to Purchaser under the IP Agreement, Purchaser shall provide
Seller with reasonable access to the inventors of the subject of such patents to
the extent that such inventors are hereafter employed by Purchaser.
(c) To the extent that the information disclosed pursuant to this
Section 8.5 constitutes the Confidential Information of such other party, the
requesting party shall be bound by the terms of Section 8.2 with respect to such
Confidential Information.
(d) Records described in this Section 8.5 may nevertheless be
destroyed by a party if such party sends the other party written notice of its
intent to destroy records, specifying with particularity the contents of the
records to be destroyed. Such records may then be destroyed after the 30th day
following delivery of such notice unless the other party objects to the
destruction, in which case the party seeking to destroy the records shall either
agree to retain such records or to deliver such records to the objecting party.
8.6 Manufacturing Support. From the date of the Closing through November
6, 1998, Seller will make appropriate technical personnel available to provide a
reasonable level of training and manufacturing support to Purchaser in
connection with the transition of the manufacturing of the 2399 Product without
charge. Further, Seller will notify TSMC that it may sell Purchaser time on
SC212 testers (owned by Seller and located at TSMC) for a period of 6 months
following the Closing (the "Transition Period"). The parties agree and
acknowledge that Purchaser will negotiate with TSMC regarding the cost of such
use and Seller will separately negotiate with TSMC regarding compensation to be
received by Seller from TSMC with respect to such use, provided, however, that
Seller will use all commercially
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reasonable efforts to ensure that Purchaser is allocated the equivalent of
full-time use of one SC212 tester during the Transition Period.
8.7 Miscellaneous Employee Matters. (a) To the fullest extent permitted
by Law, Seller will assign to Purchaser (as its successor in interest), and
Purchaser will accept, any and all of Seller's rights, privileges, entitlements
and obligations in and to the existing immigration petitions and/or labor
certification applications filed on behalf of Sushio Verghese and Xin Wang.
(b) Purchaser and Seller reaffirm their respective obligations under
that certain letter agreement between Purchaser and Seller dated October 1,
1998.
IX. SURVIVAL AND INDEMNIFICATION
9.1 Survival of Representations, Warranties and Covenants. (a) The
representations and warranties of Seller and Purchaser contained in this
Agreement shall survive the Closing until the expiration of two years from the
Closing Date. Any claim for an Indemnifiable Loss (as defined in Section 9.2)
asserted within such period of survival as herein provided will be timely made
for purposes hereof. Notwithstanding anything herein to the contrary, no claim
for indemnification under this Agreement may be brought after the one year
anniversary of the Closing Date.
(b) Unless a specified period is set forth in this Agreement with
respect to any covenant (in which event such specified period will control and
such covenant will expire upon expiration of such specified period), the
covenants in this Agreement will survive the Closing and remain in effect
indefinitely.
9.2 Limitations on Liability. (a) For purposes of this Agreement, (i)
"Indemnity Payment" means any amount of Indemnifiable Losses required to be paid
pursuant to this Agreement, (ii) "Indemnitee" means any person or entity
entitled to indemnification under this Agreement, (iii) "Indemnifying Party"
means any person or entity required to provide indemnification under this
Agreement, (iv) "Indemnifiable Losses" means any and all damages, losses,
liabilities, obligations, costs and expenses, and any and all claims, demands or
suits (by any person or entity, including, without limitation, any Governmental
Authority), including, without limitation, the costs and expenses of any and all
actions, suits, proceedings, demands, assessments, judgments, settlements and
compromises relating thereto and including reasonable attorneys' fees and
expenses in connection therewith, and (v) "Third Party Claim" means any claim,
action or proceeding made or brought by any person or entity who or which is not
a party to this Agreement.
(b) Notwithstanding any other provision hereof or of any applicable
Law, (i) no Indemnitee will be entitled to make a claim against an Indemnifying
Party under Sections 9.3(a)(i) or (ii), or 9.3(b)(i) or (ii), as applicable,
unless and until the aggregate amount of claims asserted for Indemnifiable
Losses under Sections 9.3(a)(i) and (ii), with respect to claims by Purchaser,
or 9.3(b)(i) and (ii), with respect to claims by Seller, exceeds
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$100,000, in which event the Indemnitee will be entitled to make a claim against
the Indemnifying Party in respect of Indemnifiable Losses only to the extent of
such excess and (ii) no Indemnitee shall be liable for Indemnity Payments under
Sections 9.3(a)(i) or (ii)(other than with respect to a breach of Section 8.1
which is continuing and uncured 30 days after Seller's receipt of written notice
from Purchaser of such a breach), or 9.3(b)(i) or (ii), as applicable, or
payments under Section 8.4, to the extent that the aggregate of such Indemnity
Payments by such Indemnifying Party together with the payments by such
Indemnifying Party under Section 8.4 exceeds 50% of the aggregate amounts paid
by Purchaser to Seller pursuant to Section 4.1 of this Agreement and Section 6.1
of the IP Agreement.
9.3 Indemnification. (a) Subject to Sections 9.1 and 9.2, Seller agrees
to indemnify, defend and hold harmless Purchaser from and against any and all
Indemnifiable Losses resulting from or arising out of:
(i) any failure of a representation or warranty of Seller
contained in this Agreement to be true and correct as of the Closing Date;
(ii) any breach of any agreement or covenant of Seller contained
in this Agreement; and
(iii) any third party claims regarding Retained Liabilities
arising out of the operation of the Seller's business prior to the Closing which
relate to (A) a lien on the Assets that secures indebtedness, (B) failure to
comply with any "bulk sales" laws applicable to the transactions contemplated
hereby, or (C) an assertion by such third party of a successor liability claim.
(b) Purchaser agrees to indemnify, defend and hold harmless Seller
from and against any and all Indemnifiable Losses resulting from or arising out
of:
(i) any failure of a representation or warranty of Purchaser
contained in this Agreement to be true and correct as of the Closing Date;
(ii) any breach of any agreement or covenant of Purchaser
contained in this Agreement; and
(iii) any Assumed Liabilities.
9.4 Defense of Claims. (a) If any Indemnitee receives notice of
assertion or commencement of any Third Party Claim against such Indemnitee with
respect to which an Indemnifying Party is obligated to provide indemnification
under this Agreement, the Indemnitee will give such Indemnifying Party
reasonably prompt written notice thereof, but in any event not later than 15
calendar days after receipt of such notice of such Third Party Claim. Such
notice will describe the Third Party Claim in reasonable detail, will include
copies of all material written evidence thereof and will indicate the estimated
amount, if reasonably practicable, of the Indemnifiable Loss that has been or
may be sustained by the Indemnitee. The Indemnifying Party will have the right
to participate in, or, by giving written
18
<PAGE> 19
notice to the Indemnitee, to assume, the defense of any Third Party Claim at
such Indemnifying Party's own expense and by such Indemnifying Party's own
counsel (reasonably satisfactory to the Indemnitee), and the Indemnitee will
cooperate in good faith in such defense.
(b) If, within 30 calendar days after giving notice of a Third Party
Claim to an Indemnifying Party pursuant to Section 9.4(a), an Indemnitee
receives written notice from the Indemnifying Party that the Indemnifying Party
has elected to assume the defense of such Third Party Claim as provided in the
last sentence of Section 9.4(a), the Indemnifying Party will not be liable for
any legal expenses subsequently incurred by the Indemnitee in connection with
the defense thereof; provided, however, that if the Indemnifying Party fails to
take reasonable steps necessary to defend diligently such Third Party Claim
within 30 calendar days after receiving written notice from the Indemnitee that
the Indemnitee believes the Indemnifying Party has failed to take such steps or
if the Indemnifying Party has not undertaken to indemnify the Indemnitee in
respect of all Indemnifiable Losses relating to the matter, the Indemnitee may
assume its own defense, and the Indemnifying Party will be liable for all
reasonable costs or expenses paid or incurred in connection therewith. Without
the prior written consent of the Indemnitee, the Indemnifying Party will not
enter into any settlement of any Third Party Claim which would lead to liability
or create any financial or other obligation on the part of the Indemnitee for
which the Indemnitee is not entitled to indemnification hereunder. If a firm
offer is made to settle a Third Party Claim without leading to liability or the
creation of a financial or other obligation on the part of the Indemnitee for
which the Indemnitee is not entitled to indemnification hereunder and the
Indemnifying Party desires to accept and agree to such offer, the Indemnifying
Party will give written notice to the Indemnitee to that effect. If the
Indemnitee fails to consent to such firm offer within 10 calendar days after its
receipt of such notice, the Indemnitee may continue to contest or defend such
Third Party Claim and, in such event, the maximum liability of the Indemnifying
Party as to such Third Party Claim will not exceed the amount of such settlement
offer, plus costs and expenses paid or incurred by the Indemnitee through the
end of such 10 calendar day period.
(c) A failure to give timely notice or to include any specified
information in any notice as provided in Sections 9.4(a) or 9.4(b) will not
affect the rights or obligations of any party hereunder except and only to the
extent that, as a result of such failure, any party which was entitled to
receive such notice was deprived of its right to recover any payment under its
applicable insurance coverage or was otherwise damaged as a result of such
failure.
(d) The Indemnifying Party will have a period of 30 calendar days
within which to respond in writing to any claim by an Indemnitee on account of
an Indemnifiable Loss pursuant to Section 9.3 that does not result from a Third
Party Claim (a "Direct Claim"). If the Indemnifying Party does not so respond
within such 30 calendar day period, the Indemnifying Party will be deemed to
have rejected such claim. In the event the Indemnifying Party rejects, or is
deemed to have rejected, a Direct Claim, the Indemnitee will be free to pursue
such remedies as are available at law or in equity in respect of such Direct
Claim.
19
<PAGE> 20
9.5 Exclusive Remedy. From and after the Closing Date, to the extent
permitted by law, the foregoing provisions of this Article IX are the sole and
exclusive remedy of Purchaser (other than temporary and/or permanent injunctive
relief) for any and all breaches of representations, warranties, covenants or
agreements of Seller contained in this Agreement.
X. MISCELLANEOUS PROVISIONS
10.1 Notices. All notices and other communications required or permitted
hereunder will be in writing and, unless otherwise provided in this Agreement,
will be deemed to have been duly given when delivered in person or when
dispatched by electronic facsimile transfer (confirmed in writing by mail
simultaneously dispatched) or one business day after having been dispatched by a
nationally recognized overnight courier service to the appropriate party at the
address specified below:
(a) If to Seller, to:
Adaptec, Inc.
691 South Milpitas Boulevard
Milpitas, California 95035
Attention: Chief Executive Officer
Facsimile No.: (408) 957-6670
with a copy to:
Adaptec, Inc.
691 South Milpitas Boulevard
Milpitas, California 95035
Attention: General Counsel
Facsimile No.: (408) 957-7137
(b) If to Purchaser, to:
Texas Instruments Incorporated
7839 Churchill Way, M/S 3995
Dallas, Texas 75251
- or -
P.O. Box 650311, M/S 3995
Dallas, Texas 75265
Attention: Charles D. Tobin
Facsimile No.: (214) 917-3804
with a copy to:
Texas Instruments Incorporated
8505 Forest Lane, M/S 8658
Dallas, Texas 75243
20
<PAGE> 21
- or -
P.O. Box 660199, M/S 8658
Dallas, Texas 75266
Attention: Richard J. Agnich, Esq.
Facsimile No.: (972) 480-5061
or to such other address or addresses as any such party may from time to time
designate as to itself by like notice.
10.2 Expenses. Except as otherwise expressly provided herein, each party
hereto will pay any expenses incurred by it incident to this Agreement and in
preparing to consummate and consummating the transactions provided for herein.
10.3 Successors and Assigns. This Agreement will be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns, but will not be assignable or delegable by any party without
the prior written consent of the other party; provided, however, that upon
notice to the other party, either party may assign or delegate any or all of
their rights or obligations under this Agreement to any Affiliate thereof or to
any Person that directly or indirectly acquires, after the Closing, all or
substantially all of the assets or voting stock of such party.
10.4 Waiver. Purchaser may, by written notice to Seller, and Seller may,
by written notice to Purchaser, (a) extend the time for performance of any of
the obligations of the other party under this Agreement, (b) waive any
inaccuracies in the representations or warranties of the other party contained
in this Agreement, (c) waive compliance with any of the conditions or covenants
of the other party contained in this Agreement, or (d) waive or modify
performance of any of the obligations of the other party under this Agreement;
provided, however, that no such party may, without the prior written consent of
the other parties, make or grant such extension of time, waiver of inaccuracies
or compliance or waiver or modification of performance with respect to its
representations, warranties, conditions or covenants hereunder. Except as
provided in the immediately preceding sentence, no action taken pursuant to this
Agreement will be deemed to constitute a waiver of compliance with any
representations, warranties, conditions or covenants contained in this Agreement
and will not operate or be construed as a waiver of any subsequent breach,
whether of a similar or dissimilar nature.
10.5 Entire Agreement; Disclosure Schedules. This Agreement, which
includes the schedules and exhibits hereto, supersedes any other agreement,
whether written or oral, that may have been made or entered into by any party
relating to the matters contemplated hereby and, together with the NDA,
constitutes the entire agreement by and among the parties hereto.
Notwithstanding the foregoing, that certain letter agreement dated September 30,
1998, between the parties addressing certain Seller employee matters shall
continue in full force and effect.
10.6 Amendments, Supplements, Etc. This Agreement may be amended or
supplemented at any time by additional written agreements as may mutually be
determined by
21
<PAGE> 22
Purchaser and Seller to be necessary, desirable or expedient to further the
purposes of this Agreement or to clarify the intention of the parties.
10.7 Rights of the Parties. Nothing expressed or implied in this
Agreement is intended or will be construed to confer upon or give any Person
other than the parties hereto any rights or remedies under or by reason of this
Agreement or any transaction contemplated hereby.
10.8 Further Assurances. From time to time, as and when requested by any
party hereto, the other party will execute and deliver, or cause to be executed
and delivered, all such documents and instruments, make such other deliveries
and take such other actions as may be reasonably necessary to consummate the
transactions contemplated by this Agreement.
10.9 Applicable Law. This Agreement and the legal relations among the
parties hereto will be governed by and construed in accordance with the rules
and substantive Laws of the State of California, United States of America,
without regard to conflicts of law provisions thereof.
10.10 Execution in Counterparts. This Agreement may be executed in two
or more counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same agreement.
10.11 Titles and Headings. Titles and headings to Sections herein are
inserted for convenience of reference only, and are not intended to be a part of
or to affect the meaning or interpretation of this Agreement.
10.12 Invalid Provisions. If any provision of this Agreement is held to
be illegal, invalid, or unenforceable under any present or future Law, and if
the rights or obligations under this Agreement of Seller on the one hand and
Purchaser on the other hand will not be materially and adversely affected
thereby, (a) such provision will be fully severable; (b) this Agreement will be
construed and enforced as if such illegal, invalid, or unenforceable provision
had never comprised a part hereof; (c) the remaining provisions of this
Agreement will remain in full force and effect and will not be affected by the
illegal, invalid, or unenforceable provision or by its severance from this
Agreement; and (d) in lieu of such illegal, invalid, or unenforceable provision,
there will be added automatically as a part of this Agreement a legal, valid,
and enforceable provision as similar in terms to such illegal, invalid, or
unenforceable provision as may be possible.
10.13 Bulk Sales. Subject to the provisions of Article IX of this
Agreement, Purchaser waives compliance by Seller with the provisions of the
so-called bulk sales Law of any applicable jurisdiction.
10.14 Transfers. Purchaser and Seller will cooperate and take such
action as may be reasonably requested by the other in order to effect an orderly
transfer of the Assets with a minimum of disruption to the operations and
employees of the businesses of Purchaser and Seller.
22
<PAGE> 23
10.15 Transfer Taxes. All sales, use, transfer, stamp, conveyance, value
added or other similar taxes, duties, excises or governmental charges imposed by
any taxing jurisdiction, domestic or foreign, and all recording or filing fees,
notarial fees or other similar costs of Closing with respect to the transfer of
the Assets or otherwise on account of this Agreement or the transactions
contemplated hereby (the "Transaction Taxes") will be borne by Purchaser, and,
to the extent that there are any collection or withholding obligations on the
part of Seller, shall be payable by Purchaser at the Closing. Subject to the
agreement regarding the allocation of the Purchase Price in Section 4.2, Seller
and Purchaser shall use all commercially reasonable efforts to cooperate in
order to minimize the Transaction Taxes.
10.16 Brokers. Purchaser hereby agrees to indemnify and hold harmless
Seller, and Seller hereby agrees to indemnify and hold harmless Purchaser,
against any liability, claim, loss, damage or expense incurred by Seller or
Purchaser, respectively, relating to any fees or commissions owed to any broker,
finder or financial advisor as a result of actions taken by Purchaser or Seller,
respectively.
10.17 Attorneys' Fees. If any action at law or in equity is necessary to
enforce or interpret the terms of this Agreement, the prevailing party shall be
entitled to recover in such action its reasonable attorneys' fees, costs and
necessary disbursements in addition to any other relief to which it may be
entitled.
10.18 Dispute Resolution. (a) Purchaser and Seller shall attempt to
resolve disputes between the Purchaser and the Seller arising out of or in
connection with this Agreement through good faith negotiations as provided
herein. The parties agree that disputes shall be fully discussed by
representatives of Purchaser and the Seller involved in the dispute in an
attempt to achieve a prompt resolution of such dispute. In the event that such
dispute shall not be promptly resolved by the mutual agreement of such
representatives, the dispute shall be submitted to senior management
representatives of Purchaser and Seller. Such senior management representatives
of Purchaser and Seller shall meet and fully discuss such dispute in an attempt
to achieve a prompt resolution of the dispute. If such dispute is not promptly
resolved by the mutual agreement of such senior management representatives of
Purchaser and Seller, Purchaser and Seller shall be free to exercise any of the
remedies available to it (i) pursuant to the terms of this Agreement or (ii)
otherwise at law or in equity, provided, however, that the parties hereby waive
trial by jury in any litigation in any court with respect to, in connection
with, or arising out of this Agreement or the transactions contemplated hereby.
23
<PAGE> 24
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
TEXAS INSTRUMENTS INCORPORATED
ADAPTEC, INC.
<PAGE> 25
Exhibits and Schedules to Asset Purchase Agreement
<TABLE>
<CAPTION>
Exhibits
- --------
<C> <S>
Exhibit A: Definitions
Exhibit B: Bill of Sale
Exhibit C: Assignment of Contracts
Exhibit D: IP Agreement
Exhibit E: Sublease Agreement
Exhibit F: Assumption Agreement
Schedules
- ---------
Schedule 1 Products
Schedule 2.1(a) Custom Analog Cells
Schedule 2.1(b) Tangible Assets
Schedule 2.1(c) Technology Deliverables
Schedule 2.1(d) Intangible Assets
Schedule 2.1(e) High-End Contracts
Schedule 2.1(g) 2399 Inventory
Schedule 2.2 Certain Excluded Assets
Schedule 5.2(v) Third Party Consents (to be delivered at Closing)
Schedule 6 Disclosure Schedule
Schedule 6.3 Required Consents
Schedule 6.5(c) Licenses
Schedule 6.8 Product Warranties
Schedule 6.10 Custom
</TABLE>
<PAGE> 1
Exhibit 2.2
ASSET ACQUISITION AGREEMENT
DATED AS OF JANUARY 15, 1999
AMONG
ADAPTEC, INC.,
ADAPTEC MFG. (S) PTE. LTD.
AND
STMICROELECTRONICS, INC.
<PAGE> 2
ASSET ACQUISITION AGREEMENT
This ASSET ACQUISITION AGREEMENT (this "AGREEMENT") is made and entered
into as of January 15, 1999 (the "EFFECTIVE DATE"), by and among Adaptec, Inc.,
a Delaware corporation ("AIM"), Adaptec Mfg. (S) Pte. Ltd., a wholly-owned
Singapore subsidiary of AIM ("AMS" and, together with AIM, "SELLER") and
STMicroelectronics, Inc., a Delaware corporation ("PURCHASER").
W I T N E S S E T H:
WHEREAS, Seller desires to sell and assign to Purchaser, and Purchaser
desires to purchase and acquire from Seller, certain assets associated with
Seller's Desktop Peripherals Business (as defined below), all upon the terms and
subject to the conditions set forth in this Agreement;
WHEREAS, AIM desires to grant to Purchaser, and Purchaser desires to
receive from AIM licenses to certain intellectual property rights of AIM in
connection with the design, development and manufacture of Products and
commercial exploitation of technology associated with the Desktop Peripherals
Business; and
WHEREAS, in connection with the sale of assets and grant of licenses
described above, Seller will permit Purchaser to make offers of employment and
hire employees of Seller who have worked in the Desktop Peripherals Business;
NOW, THEREFORE, in consideration of the facts stated in the above
recitals and of the mutual agreements and covenants hereinafter set forth, and
for good and valuable consideration, the receipt, sufficiency and adequacy of
which is hereby acknowledged, the parties agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
SECTION 1.1. Certain Defined Terms. As used in this Agreement, the
following terms shall have the following meanings:
"AFFILIATE" or "ASSOCIATE" shall have those meanings ascribed to such
terms by Rule 405 promulgated under the 1933 Act.
"ANCILLARY AGREEMENTS" means, collectively, the Bill of Sale, the
Assignment and Assumption Agreement, the License Agreement, the Facilities
Agreement and the Manufacturing Agreement.
"ASSIGNMENT AND ASSUMPTION AGREEMENT" means the Assignment and
Assumption Agreement substantially in the form of EXHIBIT A.
"ASSUMED LIABILITIES" means (i) any and all liabilities of Seller under
the Seller Contracts to the extent that such liabilities arise, are incurred or
require performance of an action on or
<PAGE> 3
subsequent to the Closing Date, (ii) subject to the provisions of Section 10.4,
any and all Warranty Claims (as defined in Section 10.4), and (iii) the
liabilities and obligations listed on SCHEDULE 1 hereto.
"BILL OF SALE" means the Bill of Sale substantially in the forms of
EXHIBIT B.
"BUSINESS ASSETS" means the Purchased Assets and the Licensed Assets.
"CIRCUITS" means discrete circuits that provide one or more
functionalities that are a subset of the aggregate functionalities of a Product.
"CLOSING ACCOUNTS RECEIVABLE" means Seller's accounts receivable,
unbilled receivables, notes and other amounts receivable from third parties in
respect of Products sold by Seller, determined as of the date two business days
prior to the Closing Date.
"DESKTOP PERIPHERALS BUSINESS" means Seller's business of designing,
developing, manufacturing, testing, marketing, licensing, selling, distributing,
using, modifying, operating, installing, servicing, supporting, maintaining,
repairing or otherwise using or commercially exploiting one or more of the
Products or Product Designs.
"ENCUMBRANCE" means any pledge, lien, collateral assignment, security
interest, mortgage, deed of trust, title retention, conditional sale or other
security arrangement, or adverse claim of title or ownership, other than those
which do not materially detract from or interfere with the ownership of the
properties subject thereto.
"ERISA" means the U.S. Employee Retirement Income Security Act of 1974,
as amended, and the rulings and regulations promulgated thereunder.
"EXCLUDED ASSETS" means all assets of Seller other than the Purchased
Assets and the Licensed Assets, including, without limitation, (i) all Seller's
cash, bank accounts and securities; (ii) all insurance policies of Seller and
all rights of Seller of every nature and description under or arising out of
such insurance policies; (iii) claims for refunds of Taxes paid by Seller prior
to the Closing Date; (iv) all assets of, or held by or with respect to, any
employee benefit plan (whether or not governed by ERISA) or any trust, fund or
account that is related to any such employee benefit plan or that is similar in
purpose or function thereto; (v) except as otherwise provided herein, Seller's
right, title and interest in the name "Adaptec" or any variation or combination
thereof, or Seller's other trademarks, monograms or logos; and (vi) the assets
listed on SCHEDULE 13.
"FACILITIES AGREEMENT" means an agreement between Seller and Purchaser
providing for the occupancy and use by Purchaser of certain facilities of Seller
in substantially the form attached as EXHIBIT C hereto.
"HSR ACT" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and the rules and regulations promulgated thereunder.
"INTANGIBLE ASSETS" means, collectively, the intangible assets,
properties and rights of Seller listed on SCHEDULE 2 hereto.
<PAGE> 4
"INTELLECTUAL PROPERTY RIGHTS" means any and all existing or future
patent rights (including patent applications and disclosures), rights of
priority, mask work rights, industrial design rights, copyrights, moral rights,
rights of Seller in trade secrets, know-how and any other intellectual property
rights recognized in any country or jurisdiction of the world.
"INTERNAL REVENUE CODE" means the U.S. Internal Revenue Code of 1986, as
amended, and the Treasury regulations (final and temporary) promulgated
thereunder and the administrative pronouncements issued by the Internal Revenue
Service relating thereto.
"INVENTORY" means the finished Products described on SCHEDULE 3, as
added to as a result of the creation of additional finished Products, or the
repurchase of unsold Products pursuant to outstanding agreements with
distributors, and/or subtracted from as a result of sales of finished Products,
in each case, during the period between the Effective Date and the date two
business days prior to the Closing Date. The Purchase Price shall be (x)
adjusted upward in an amount equal to Seller's actual cost to manufacture the
additional finished Products added to Inventory during such period (provided,
that the amount of upward adjustments in respect of Products repurchased from
distributors shall not exceed $250,000), (y) adjusted downward in an amount
equal to Seller's actual cost to manufacture the finished Products sold during
such period and (z) in the event that the Closing shall occur after January 8,
1998, adjusted upward or downward in an amount equal to the reserve applied to
the Inventory on the date of determination on a basis consistent with Seller's
past practice. Such additions to and subtractions from the Inventory shall be
referred to herein as the "INVENTORY ADJUSTMENTS" and the net result of such
upward and downward adjustments to the Purchase Price shall be referred to
herein as the "NET INVENTORY PRICE ADJUSTMENT."
"LICENSE AGREEMENT" means the Desktop Electronics Technology and Patent
License Agreement between AIM and Purchaser substantially in the form of EXHIBIT
D hereto.
"LICENSED ASSETS" means the Licensed Assets and Licensed Patents
collectively, as such terms are defined in the License Agreement.
"MANUFACTURING AGREEMENT" means an agreement between Seller and
Purchaser providing for the fabrication, manufacturing and testing of Products,
elements and works-in progress thereof, for a period not to exceed nine months
following the Closing Date, in substantially the form attached as EXHIBIT E
hereto.
"PERSON" means any individual, partnership, limited liability company,
firm, corporation, association, trust, unincorporated organization or other
entity, as well as any syndicate or group that would be deemed to be a person
under Section 13(d)(3) of the Securities Exchange Act of 1934, as amended.
"PRODUCTS" means the products and products under development of Seller
listed in SCHEDULE 4 hereto.
"PRODUCT DESIGN" means the particular arrangement of Circuits that
comprise and implement the aggregate functionalities of a Product, as reflected
in the layouts and schematic databases listed on SCHEDULE 5. For clarification,
a "Product Design" does not include the particular individual Circuits included
in a Product.
"PURCHASED TECHNOLOGY DELIVERABLES" means the deliverables listed on
SCHEDULE 8.
<PAGE> 5
"PURCHASER'S DISCLOSURE LETTER" means Purchaser's Disclosure Letter
dated as of the Effective Date which is being delivered to Seller concurrently
with the execution of this Agreement.
"SELLER CONTRACTS" means those leases, licenses, agreements, contracts,
understandings, arrangements, commitments and purchase orders listed on SCHEDULE
6 hereto.
"SELLER'S DISCLOSURE LETTER" means Seller's Disclosure Letter dated as
of the Effective Date which is being delivered to Purchaser concurrently with
the execution of this Agreement.
"SELLER'S KNOWLEDGE" or "KNOWLEDGE OF SELLER": A particular fact or
other matter shall be deemed to be within "Seller's knowledge" if any
director-level or more senior officer of Seller is actually aware of such fact
or other matter.
"TANGIBLE ASSETS" means (x) the tangible personal property assets listed
on SCHEDULE 7 hereto, subject to revision based upon a fixed assets inventory to
be conducted within ten business days after the Effective Date, and (y) the
personal computers, work stations, laboratory equipment, printers associated
with personal computers, and network servers which are fully dedicated to the
Desktop Peripherals Business and are not part of Seller's facilities
infrastructure, which assets listed in clause (y): (1) are owned by Seller and
currently utilized by Employees (as defined in Section 3.11) in the ordinary
course of performing their duties for the Desktop Peripherals Business
(excluding such assets used only on an incidental basis), and (2) shall not
exceed $1,000,000 in aggregate value, and (3) shall be listed on a schedule to
be delivered to Purchaser at the Closing. The Tangible Assets listed in clause
(y) shall not include the fabrication, manufacturing, testing or packaging
equipment used in the production of the Products, telecommunications equipment
(including cellular telephones and pagers), projectors, furniture, fixtures,
copiers or office supplies.
"TAX" or "TAXES" means all taxes or similar governmental charge or levy
of any kind whatsoever (whether payable directly or by withholding), including
without limitation, income taxes, gross receipts taxes, franchise taxes,
transfer taxes or fees, stamp taxes, sales taxes, use taxes, excise taxes, ad
valorem taxes, value added taxes, documentary taxes, intangible personal
property taxes, withholding taxes, real or personal property taxes, employee
withholding taxes, worker's compensation, payroll taxes, unemployment insurance,
social security, minimum taxes or windfall profits taxes, together with any
related liabilities, penalties, fines, additions to tax or interest, imposed by
any governmental agency.
"THIRD PARTY ASSETS" means (i) the personal property assets, tangible
and intangible, licensed or leased to Seller by third parties under certain
Seller Contracts and (ii) Seller's license or other rights to such third-party
assets under such Seller Contracts.
<PAGE> 6
ARTICLE II
ACQUISITION OF ASSETS
SECTION 2.1. Assets to Be Acquired and Licensed.
(a) Purchased Assets. Subject to the terms and conditions of this
Agreement, at the Closing, Seller shall sell, assign, transfer, convey and
deliver to Purchaser (or cause to be sold, assigned, transferred, conveyed and
delivered to Purchaser) and Purchaser shall purchase and acquire from Seller,
free and clear of all Encumbrances, all right, title and interest in and to all
of the following (collectively, the "PURCHASED ASSETS"):
(i) the Intangible Assets (including all Intellectual Property
Rights therein and thereto);
(ii) the Inventory (subject to the Inventory Adjustments);
(iii) the Product Designs;
(iv) the Tangible Assets;
(v) the Purchased Technology Deliverables;
(vi) the right to enforce confidentiality, non-disclosure,
employee invention assignment and other proprietary rights
agreements between Seller and Hired Employees (as defined in
Article VI below) with respect to the Desktop Peripherals
Business;
(vii) all of Seller's rights under the Seller Contracts, including
Third Party Assets;
(viii) copies of Seller's marketing and sales information, pricing,
marketing plans, business plans, financial and business
projections and other files and records which pertain
exclusively to the Desktop Peripherals Business, but
excluding any personnel files of any Employee; and
(ix) the goodwill associated with the foregoing.
(b) Licensed Assets. The parties acknowledge that, in addition to the
Purchased Assets, certain assets related to the Desktop Peripherals Business
also are essential to other businesses conducted by Seller or licensed by Seller
to third parties. Accordingly, with respect to the Licensed Assets, at the
Closing, AIM shall grant to Purchaser licenses to and deliver the Licensed
Assets on the terms and conditions set forth in the License Agreement.
(c) Excluded Assets. The parties agree that Seller is not selling or
assigning to Purchaser, and the Purchased Assets do not include, any of the
Licensed Assets or the Excluded Assets.
(d) Trademark License. Subject to the terms and conditions of this
Agreement, as of the Closing, Seller hereby grants to Purchaser and Purchaser
accepts a worldwide, nontransferable, fully-paid and royalty-free right and
license under any rights Adaptec may have in
<PAGE> 7
the Adaptec Marks, to reproduce and affix: (i) through the end-of-life of each
Product, the Adaptec trademark "AIC" to units of the Products as embedded as of
the Closing Date in the mask works for such Products; (ii) for one year after
the Closing Date, the Adaptec trademark "AIC" in price lists, literature and
advertising for the Products; and (iii) on a Product-by-Product basis, until the
sale by Purchaser of all Inventory of such Product transferred to Purchaser on
the Closing Date, the Adaptec trademarks "Adaptec" and the stylized "A" logo on
the device packaging for the Products (such Adaptec trademarks collectively, the
"ADAPTEC MARKS"). Purchaser agrees to cease using the Adaptec Marks upon the
expiration of the licenses herein granted. Purchaser acknowledges and agrees
that Seller owns and will continue to own all right, title and interest in and
to the Adaptec Marks and in any and all goodwill therein and thereto, whether
arising as a result of Purchaser's use of the Adaptec Marks or otherwise.
Purchaser hereby assigns and, if and as Seller may request in the future, agrees
to assign and affirm assignment to Seller of all such right, title and interest
in the Adaptec Marks and related goodwill. If requested by Seller, Purchaser
will cooperate with Seller in securing any trademark registrations and other
indicia of ownership for which Purchaser's cooperation is required as a matter
of applicable local law as a result of Purchaser's use of the Adaptec Marks.
Purchaser agrees to use the Adaptec Marks in substantially the same manner of
current use by Seller unless otherwise agreed by Seller in writing. Without
limiting the preceding sentence, without the prior written consent of Seller
(which consent shall not be unreasonably withheld), Purchaser agrees not to
combine, alter or obscure the Adaptec Marks in any way or authorize any third
party to do so.
SECTION 2.2. Liabilities Assumed and Excluded.
(a) As a material inducement and consideration to Seller to enter into
this Agreement and perform its obligations hereunder, at the Closing, Purchaser
shall assume, pay, perform and discharge the Assumed Liabilities.
(b) Except for the Assumed Liabilities, Purchaser shall not assume or
otherwise become obligated to pay, perform or discharge any liabilities, debts
or obligations of Seller and Seller shall retain, and shall be solely
responsible and liable for paying, performing and discharging when due, all of
Seller's liabilities other than the Assumed Liabilities.
SECTION 2.3. Purchase Price; Allocation.
(a) Purchase Price. In consideration of the sale, transfer and
assignment of the Purchased Assets to Purchaser and the license of the Licensed
Assets to Purchaser, Purchaser agrees to pay to Seller at the Closing the sum of
(x) $73,000,000 (seventy-three million United States dollars) plus or minus (y)
the Net Inventory Price Adjustment (collectively, the "PURCHASE PRICE") in cash.
(b) Allocation.
(i) Purchase Price. Purchaser and Seller shall use all commercially
reasonable efforts to agree upon an allocation of the Purchase Price among the
Business Assets, in accordance with the allocation requirements of Section 1060
of the Internal Revenue Code. Purchaser and Seller agree to commence discussions
regarding the allocation as soon as practicable, but in no event later than 30
days, following the Closing Date. The allocation of the Purchase Price agreed
upon by the parties pursuant to this Section shall be reduced to a writing
executed and delivered by Seller and Purchaser to each other (the "PURCHASE
PRICE ALLOCATION
<PAGE> 8
AGREEMENT"). Any subsequent adjustments to the allocable Purchase Price shall be
reflected in the Purchase Price Allocation Agreement in a manner consistent with
Treasury Regulation Section 1.1060-lT(f).
(ii) Consistent Treatment and Characterization of Amounts. For all
Tax purposes, Purchaser and Seller agree to report the transactions contemplated
in this Agreement in a manner consistent with the Purchase Price Allocation
Agreement, and will not take any position inconsistent therewith in any Tax
return, in any refund claim, in any litigation or otherwise, unless required to
do so by a governmental authority. Seller and Purchaser shall each be
responsible for the preparation of their own Section 1060 statements and forms
in accordance with applicable Tax laws, and each shall execute and deliver to
each other such statements and forms as are reasonably requested by the other
party.
SECTION 2.4. Closing. Subject to the terms and conditions of this
Agreement, the sale, purchase, license and transfer of the Business Assets and
the assumption of the Assumed Liabilities shall take place at a closing (the
"CLOSING") at the offices of Fenwick & West LLP, Two Palo Alto Square, Palo
Alto, California at 10:00 a.m., local time, on the second business day after the
satisfaction or waiver of the conditions to Closing set forth in Article VIII or
at such other time or on such other date or at such other place as Seller and
Purchaser may mutually agree in writing (the day on which the Closing takes
place being the "CLOSING DATE").
SECTION 2.5. Closing Deliveries by Seller. At the Closing, Seller shall
deliver or cause to be delivered to Purchaser or Purchaser's affiliates
designated by Purchaser:
(i) all Business Assets to the facility or other location specified by
Purchaser, in such manner as Purchaser directs, in each case at Seller's cost
and expense; provided, that if Purchaser directs that any Business Assets be
delivered to a location more than fifty miles from either Seller's facilities at
Milpitas, California or Longmont, Colorado, depending on which location such
Business Asset is located, such delivery shall be at Purchaser's sole cost and
expense;
(ii) executed counterparts of each Ancillary Agreement to which Seller
is a party;
(iii) (x) assignments substantially in the forms of EXHIBIT H (the
"PATENT ASSIGNMENTS"), by which Seller shall assign to Purchaser the patents
included in the Purchased Assets, executed on Seller's behalf by an officer of
Seller with his or her execution notarized, in a form acceptable for recording
with the United States Patent and Trademark Office; and (y) assignments from
Seller to Purchaser of all registered mask works included in the Purchased
Assets, duly executed on behalf of Seller by an officer and notarized, and in a
form acceptable for recording with the United States Copyright Office in
substantially the forms of EXHIBIT I attached hereto (the "MASK WORK
ASSIGNMENTS"); and
(iv) all other items required to be delivered by Seller at the Closing
pursuant to Section 8.2 of this Agreement or any other provision hereof or any
Ancillary Agreement.
SECTION 2.6. Closing Deliveries by Purchaser. At the Closing, Purchaser
shall deliver or cause to be delivered to Seller:
(i) payment of the full amount of the Purchase Price by wire transfer of
immediately available funds to an account of Seller designated to Purchaser;
<PAGE> 9
(ii) executed counterparts of each Ancillary Agreement to which
Purchaser is a party; and
(iii) all other items required to be delivered by Purchaser at the
Closing pursuant to Section 8.1 of this Agreement or any other provision hereof
or any Ancillary Agreement.
SECTION 2.7. Unassignable Assets. Notwithstanding any other provision of
this Agreement or any of the Ancillary Agreements, to the extent that any of the
Seller Contracts or any other assets constituting part of the Purchased Assets
are not assignable or otherwise transferable to Purchaser or if any of the
Licensed Assets may not be licensed to Purchaser without the consent, approval
or waiver of another party thereto or any third party (including any
governmental agency), or if such assignment, transfer or license would
constitute a breach thereof or a violation of any applicable law or agreement
with any third party, then neither this Agreement nor such Ancillary Agreements
shall constitute an assignment or transfer (or an attempted assignment or
transfer) thereof until such consent, approval or waiver of such party or
parties has been duly obtained. With respect to each Seller Contract or Licensed
Asset whose assignment, transfer or license to Purchaser requires the consent,
approval or waiver of another party thereto or any third party, Seller shall use
all commercially reasonable efforts to obtain such consent, approval or waiver
of such other party or parties or such third party to such assignment or
transfer as promptly as practicable. To the extent that the consents, approvals
and waivers referred to in this Section are not obtained by Seller, Seller shall
use all commercially reasonable efforts to (a) provide to Purchaser, at the
request and expense of Purchaser, the financial and business benefits of such
Seller Contract or Licensed Asset and (b) enforce, at the request and expense of
Purchaser, for the account of Purchaser, any rights of Seller arising from any
such Seller Contract (including without limitation the right to elect to
terminate such Seller Contract in accordance with the terms thereof upon the
advice of Purchaser). With regard to the expenses described in the preceding
sentence, Purchaser shall only be responsible for the direct expenses of Seller
in connection therewith, and if only a portion of such benefits are provided to
Purchaser, Purchaser and Seller shall agree in good faith upon a reasonable pro
rata payment by Purchaser of the expenses incurred in connection with such
benefits. Purchaser agrees to cooperate with Seller and supply relevant
information to such party or parties or such third party in order to assist
Seller in its obligations under this Section. Notwithstanding the foregoing,
nothing contained herein shall obligate Seller or Purchaser to expend or pay any
amount to third parties to obtain any consents, approvals or waivers.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Purchaser that, except as
expressly set forth in the Seller's Disclosure Letter, all of the following
statements, representations and warranties are true and correct:
SECTION 3.1. Organization and Good Standing of Seller. Each of AIM and
AMS is a corporation or similar entity duly organized, validly existing and in
good standing under the laws of its jurisdiction of organization. Seller has all
requisite corporate power and authority to carry on the Desktop Peripherals
Business as now conducted and to enter into this Agreement and the Ancillary
Agreements and the transactions contemplated hereby and thereby.
<PAGE> 10
SECTION 3.2. Authorization and Validity. The execution and delivery of
this Agreement and the Ancillary Agreements and the performance of all
obligations of Seller hereunder and thereunder, has been duly and validly
authorized by all necessary corporate and shareholder action on the part of
Seller. This Agreement has been, and at the Closing the other Ancillary
Agreements will be, duly executed and delivered by Seller. This Agreement
constitutes, and, upon Seller's execution of each of the other Ancillary
Agreements, each of the other Ancillary Agreements will constitute, a legal,
valid and binding obligation of Seller enforceable against Seller in accordance
with its terms, except (i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium, and other laws of general application affecting
enforcement of creditors' rights generally; and (ii) as limited by laws relating
to the availability of specific performance, injunctive relief or other
equitable remedies.
SECTION 3.3. No Conflict. The execution, delivery and performance of
this Agreement and the Ancillary Agreements by Seller and the consummation of
the transactions contemplated hereby and thereby, subject to compliance with the
consents required in SCHEDULE 9, do not and will not (a) result in a violation
or default in any material respect of any provision of Seller's charter
documents or any judgment, order, writ or decree applicable to Seller, (b)
constitute a default (or event which with the giving of notice or lapse of time,
or both, would become a breach, violation or default) under, or give to others
any rights of termination, amendment, acceleration or cancellation of, any of
the Seller Contracts or (c) result in the creation of any material Encumbrance
on any of the Business Assets.
SECTION 3.4. Consents. No consent, approval, order or authorization of
or registration, qualification, designation, declaration or filing with, any
governmental entity on the part of Seller is required in connection with the
consummation of the transactions contemplated by this Agreement and the
Ancillary Agreements, except for compliance with the requirements of the HSR
Act. SCHEDULE 9 sets forth a true and complete list of each and every Business
Asset with respect to which the consent or approval of any third party or
governmental authority is required in order for Seller to assign, transfer or
license to Purchaser any of the Business Assets or any rights or obligations
under Seller Contracts.
SECTION 3.5. Title to Purchased Assets and Third Party Assets.
(a) Purchased Assets. Seller owns all the Purchased Assets (other than
Third Party Assets) and has good and marketable title in and to all of the
Purchased Assets (other than Third Party Assets), free and clear of all
Encumbrances whatsoever. Title to all the Purchased Assets (other than Third
Party Assets) is freely transferable from Seller to Purchaser free and clear of
all Encumbrances. The Tangible Assets are in good operating condition and
repair, subject to normal wear and tear.
(b) Third Party Assets. Except as set forth on SCHEDULE 9, Seller has
the right to transfer the Third Party Assets, without restriction and without
material degradation to the rights assigned.
SECTION 3.6. Seller Contracts. True and complete copies of the Seller
Contracts have been made available to Purchaser. To Seller's knowledge, the
Seller Contracts are valid, in full force and effect, and enforceable in
accordance with their respective terms (except as limited by applicable
bankruptcy, insolvency, reorganization, moratorium, and other laws of general
application affecting enforcement of creditors' rights generally and as limited
by laws relating to
<PAGE> 11
the availability of specific performance, injunctive relief or other equitable
remedies). Neither Seller nor, to Seller's knowledge, any other party to any
Seller Contract, is in material breach or default in performance of any of their
respective obligations thereunder, and no event exists which, with the giving of
notice or lapse of time or both, would constitute a material breach, default or
event of default on the part of Seller or, to Seller's knowledge, on the part of
any other party, to any Seller Contract that is continuing unremedied.
SECTION 3.7. Litigation. There is no claim, action, suit, arbitration,
mediation, investigation or other proceeding of any nature pending or, to
Seller's knowledge, threatened, at law or in equity, by way of arbitration or
before any court, governmental department, commission, board or agency that
adversely affects, contests or challenges Seller's authority, right or ability
to sell, convey or license any of the Business Assets to Purchaser hereunder or
otherwise perform Seller's obligations under this Agreement or any of the
Ancillary Agreements. There are no judgments, decrees, injunctions or orders of
any court, governmental department, commission, agency, instrumentality or
arbitrator pending or binding against Seller which adversely affect any of the
Business Assets.
SECTION 3.8. Intellectual Property Rights.
(a) Ownership. Seller owns or has the right to use pursuant to license,
sublicense, agreement, or other valid permission, all Intellectual Property
Rights in the Intangible Assets, Product Designs and Purchased Technology
Deliverables. Seller has taken reasonable steps to maintain and protect all
Intellectual Property Rights in the Intangible Assets, Product Designs and
Purchased Technology Deliverables.
(b) Non-Infringement. To Seller's knowledge, the Business Assets (other
than Third Party Assets) have not infringed or violated and currently do not
infringe, violate, or misappropriate any Intellectual Property Rights (other
than trademarks) of any third party, and no third party has asserted or
threatened to assert against Seller any claim of infringement or
misappropriation of any such rights. To Seller's knowledge, no third party has
interfered with, infringed upon, misappropriated, or otherwise come into
conflict with any of the Intellectual Property Rights in and to the Business
Assets (other than Third Party Assets).
(c) Licenses. SCHEDULE 10 sets forth each material license Seller has
granted to any third party with respect to any Business Asset. SCHEDULE 10 sets
forth each material Intellectual Property Right in connection with the
development, manufacture, use or sale of the Products that a third party owns
and that Seller uses pursuant to a license, sublicense, agreement or other
permission, except for licenses entered into in the ordinary course of the
Desktop Peripherals Business or standard "shrink-wrap" licenses for
off-the-shelf software products.
SECTION 3.9. Compliance with Laws. To Seller's knowledge, Seller has
complied in all material respects with and has not received any notices of
violation with respect to, any federal, state or local statute, law or
regulation of any country of the world applicable to any of the Business Assets.
SECTION 3.10. Tax Matters.
(a) Tax Assessments. There is no claim or assessment pending or, to the
knowledge of Seller, threatened, for any alleged deficiency in Tax attributable
to Seller or the affiliated group of which Seller is a member (the "SELLER
GROUP"), relating to the Business Assets, and, to the
<PAGE> 12
knowledge of Seller, there is no audit or investigation with respect to any
liability of Seller or the Seller Group for Taxes relating to the Business
Assets.
(b) No Tax Liens. There are (and as of immediately following the Closing
there will be) no Encumbrances on any of the Business Assets relating to or
attributable to Taxes.
SECTION 3.11. Employees. Set forth in SCHEDULE 11 is a complete and
accurate list, as of the Effective Date, of the employees of Seller who
currently work full-time in the Desktop Peripherals Business ("EMPLOYEES"),
including, for each Employee, such Employee's title, date of hire and adjusted
service date and location at which such Employee is working as of the Effective
Date. SCHEDULE 11 sets forth, for each Employee, a true and accurate list of the
current annual base salary, their status as exempt or non-exempt, all bonuses,
profit sharing, or commissions accrued or payable, any special compensatory or
reimbursement arrangements, comp time or other arrangements with such Employees
and any other compensatory agreements between such Employee and Seller.
SECTION 3.12. Pension and Employee Benefit Matters. Neither Seller nor
any entity which, within the last 5 years, has been under common control of or
affiliated with Seller (an "ERISA AFFILIATE") within the meaning of Section
414(b), (c) or (m) of the Internal Revenue Code, has ever been obligated to
contribute to any "multi-employer plan" as such term is defined in Section 3(37)
of ERISA. No liability to the Pension Benefit Guaranty Corporation is expected
to be incurred in connection with the transactions contemplated hereby.
SECTION 3.13. Customers. SCHEDULE 12 is a true and complete list of all
customers of the Desktop Peripherals Business as of the Effective Date
("CUSTOMERS"). Seller has good commercial working relationships with each of its
Customers.
SECTION 3.14. Year 2000 Matters. None of the Products are date or time
sensitive.
SECTION 3.15. Brokers. Other than Bear, Stearns & Co., Inc., the fees
and expenses of whom shall be paid by Seller, Seller has not employed any
broker, finder, investment banker or agent, incurred or agreed to pay any
brokerage fee, finder's fee or commission with respect to the transactions
contemplated by this Agreement, or dealt with anyone purporting to act in the
capacity of a broker, finder, investment banker or agent with respect thereto.
SECTION 3.16. Restrictive Agreements. No Business Asset is bound or
affected by any judgment, injunction, order or agreement that restricts or
prohibits its use, or following the Closing, would restrict or prohibit its use,
in the Desktop Peripherals Business as presently conducted by Seller.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to Seller that, except as set
forth in the Purchaser's Disclosure Letter, all of the following statements,
representations and warranties are true, accurate and correct:
<PAGE> 13
SECTION 4.1. Organization and Good Standing. Purchaser is a corporation
or similar entity duly organized, validly existing and in good standing under
the laws of its jurisdiction and is in good standing under the laws of its
jurisdiction of incorporation and in each jurisdiction in which it conducts
business. Purchaser has all requisite corporate power and authority to carry on
its business as now conducted and to enter into this Agreement and the Ancillary
Agreements and the transactions contemplated hereby and thereby.
SECTION 4.2. Authorization and Validity. The execution and delivery of
this Agreement and the Ancillary Agreements and the performance of all
obligations of Purchaser hereunder and thereunder, has been duly and validly
authorized by all necessary corporate and shareholder action on the part of
Purchaser. This Agreement has been, and at the Closing the other Ancillary
Agreements will be, duly executed and delivered by Purchaser. This Agreement
constitutes, and the other Ancillary Agreements when executed and delivered,
will constitute, valid and legally binding obligations of Purchaser, as
applicable, enforceable in accordance with their respective terms, except (i) as
limited by applicable bankruptcy, insolvency, reorganization, moratorium, and
other laws of general application affecting enforcement of creditors' rights
generally and (ii) as limited by laws relating to the availability of specific
performance, injunctive relief or other equitable remedies.
SECTION 4.3. No Conflict. The execution, delivery and performance of
this Agreement and the Ancillary Agreements by Purchaser and the consummation of
the transactions contemplated hereby and thereby do not and will not (a) result
in a violation or default in any material respect of any provision of
Purchaser's charter documents or any judgment, order, writ or decree applicable
to Purchaser, or (b) constitute a default (or event which with the giving of
notice or lapse of time, or both, would become a breach, violation or default)
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, any material contract of Purchaser or (c) result in the
creation of any material Encumbrance on any of Purchaser's assets.
SECTION 4.4. Consents. No consent, approval, order or authorization of,
or registration, qualification, designation, declaration or filing with, any
governmental entity or third party on the part of Purchaser is required in
connection with the consummation of the transactions contemplated by this
Agreement and the Ancillary Agreements, except for compliance with the
requirements of the HSR Act.
SECTION 4.5. Litigation. There is no claim, action, suit, arbitration,
mediation, investigation or other proceeding of any nature pending or, to
Purchaser's knowledge, threatened, at law or in equity, by way of arbitration or
before any court, governmental department, commission, board or agency that may
adversely affect, contest or challenge Purchaser's authority, right or ability
to purchase or receive licenses to any of the Business Assets from Seller
hereunder or otherwise perform Purchaser's obligations under this Agreement or
any of the Ancillary Agreements.
SECTION 4.6. Brokers. Neither Purchaser, nor any of its affiliates has
employed any broker, finder or agent, incurred or agreed to pay any brokerage
fee, finder's fee or commission with respect to the transactions contemplated by
this Agreement, or dealt with anyone purporting to act in the capacity of a
broker, finder or agent with respect thereto.
<PAGE> 14
ARTICLE V
COVENANTS
SECTION 5.1. Conduct of Business Prior to the Closing. Seller agrees
that, from the Effective Date and continuing until the earlier of the Closing
Date or the termination of this Agreement according to its terms, Seller will
carry on the Desktop Peripherals Business in the ordinary course and consistent
with Seller's past practice (taking into account the sale of the Purchased
Assets contemplated hereby and Seller's other agreements hereunder) except for
such actions of Seller as may be contemplated by this Agreement or agreed to by
Purchaser. Without limiting the foregoing, during the period described in the
preceding sentence, except in the ordinary course and consistent with Seller's
past practice or as agreed to by Purchaser, Seller agrees not to: (i) sell,
transfer, assign, convey, license, move, relocate, encumber or otherwise dispose
of any of the Purchased Assets; (ii) transfer any Employee to any other division
or position of employment within Seller; (iii) terminate the employment of any
Employee; (iv) materially change the base salary or bonus of any Employee or
establish a bonus plan or any new employee benefits for any Employee without
Purchaser's prior written approval; or (v) encourage any Employee to accept any
offer of employment other than by Purchaser.
SECTION 5.2. Consent of Third Parties. Seller shall use all commercially
reasonable efforts to obtain the consent in writing of all persons, if any,
necessary to permit Seller to assign and transfer all of the Purchased Assets
free and clear of all material Encumbrances, and license all of the Licensed
Assets, to Purchaser.
SECTION 5.3. Access to Information. From the Effective Date until the
earlier of the Closing Date or the termination of this Agreement according to
its terms, Seller will afford to the representatives of Purchaser, including its
counsel and auditors, during normal business hours, access to any and all of the
Business Assets to the end that Purchaser may have a reasonable opportunity to
make such a full investigation of the Business Assets in advance of the Closing
Date as it shall reasonably desire, and the officers of Seller will confer with
representatives of Purchaser and will furnish to Purchaser, either orally or by
means of such records, documents, and memoranda as are available or reasonably
capable of preparation, such information as Purchaser may reasonably request,
and Seller will furnish to Purchaser's auditors all consents and authority that
they may reasonably request in connection with any such examination.
SECTION 5.4. Use of Facilities; Manufacturing Services. For a period of
up to three months following the Closing Date, Seller shall permit Purchaser to
occupy and use certain facilities of the Seller, according to the terms and
conditions of the Facilities Agreement. For a period of up to nine months
following the Closing Date, Seller will provide Purchaser with certain
fabrication, manufacturing and testing services for the Products, according to
the terms and conditions of the Manufacturing Agreement.
SECTION 5.5 Further Actions. Each of the parties hereto shall, at its
own expense, execute and deliver such documents and other papers and take such
further actions as may be required to carry out the provisions of this Agreement
and the Ancillary Agreements, to cause the conditions to Closing set forth in
Article VIII to be fulfilled as promptly as possible, and to give effect to the
transactions contemplated by this Agreement and the Ancillary Agreements. In
case at any time after the Closing Date any further action is necessary or
desirable to carry out the provisions of this Agreement or the Ancillary
Agreements, each of the parties will take such
<PAGE> 15
further action (including the execution and delivery of such further instruments
and documents). Seller will sign and deliver any and all instruments and
documents necessary or appropriate to fully effect and perfect the transfer or
license, as the case may be, to Purchaser of the Business Assets. If the
Employee interviews described in clause (ii) of the penultimate sentence of
Section 6.1 identify tangible assets which are owned by Seller, are not being
transferred to Purchaser pursuant to this Agreement, and are used by an Employee
in the ordinary course of performing services in the Desktop Peripherals
Business, Seller and Purchaser shall, in good faith, determine whether such
asset should be (1) transferred to Purchaser without additional cost, (2) sold
to Purchaser in a separate transaction for additional consideration or (3)
retained by Seller.
SECTION 5.6. Confidentiality.
(a) All copies of financial information, marketing and sales
information, pricing, marketing plans, business plans, financial and business
projections, manufacturing processes and procedures, formulae, methodologies,
inventions, product designs, product specifications and drawings, and other
confidential and/or proprietary information of a party (the "DISCLOSING PARTY")
disclosed to the other party (the "NON-DISCLOSING PARTY") in the course of
negotiating the transactions contemplated by this Agreement ("CONFIDENTIAL
INFORMATION") will be held in strict confidence and not used or disclosed by the
Non-Disclosing Party or any of its employees, affiliates or stockholders and,
upon termination of this Agreement in accordance with its terms and upon the
Disclosing Party's written request to the Non-Disclosing Party, will be promptly
destroyed by the Non-Disclosing Party or returned to the Disclosing Party. The
Non-Disclosing Party's employees, affiliates and stockholders will not be given
access to Confidential Information except on a "need to know" basis. It is
agreed that Confidential Information will not include information that: (a) is
proven to have been known to the Non-Disclosing Party prior to receipt of such
information from the Disclosing Party; (b) is disclosed by a third party having
the legal right to disclose such information and who owes no obligation of
confidence to the Disclosing Party; (c) is now, or later becomes part of the
general public knowledge or literature in the art, other than as a result of a
breach of this Agreement by the Non-Disclosing Party; or (d) is proven to be
independently developed by the Disclosing Party without the use of any
Confidential Information. The provisions of this Section 5.6(a) shall supersede
the provisions of the letter agreement, dated as of October 6, 1998, between
Purchaser and Bear Stearns & Co., Inc., on behalf of Seller (the
"CONFIDENTIALITY AGREEMENT"); provided, however, that upon the termination or
expiration of this Agreement, the Confidentiality Agreement shall continue in
full force and effect as a binding agreement between Purchaser and Seller.
(b) At all times following the Closing, Seller will: (i) continue to
hold all Confidential Information which constitutes Purchased Assets
(collectively, "ACQUIRED CONFIDENTIAL INFORMATION") in strict confidence, (ii)
will not use for itself or third parties any Acquired Confidential Information,
and (iii) upon Purchaser's request, promptly destroy or deliver to Purchaser any
Acquired Confidential Information in Seller's possession or control; provided,
that Seller may internally use the original copies of all Business Records
solely to prepare and file Tax returns and prepare Seller's financial
statements, and Seller may disclose any Acquired Confidential Information as may
be required to comply with requests from all governmental agencies; provided,
further, that Seller must provide Purchaser with prior written notice of any
proposed disclosure to government agencies and with respect to the U.S.
Securities and Exchange Commission, an opportunity to seek confidential
treatment of such proposed disclosure. It is agreed that Acquired Confidential
Information will not include information that is now, or later becomes, part of
the general public knowledge or literature in the art, other than as a result of
a
<PAGE> 16
breach of this Agreement by Seller. Following the Closing, Purchaser's
obligations pursuant to Section 5.6(a) shall terminate with respect to
Confidential Information which constitutes Acquired Confidential Information.
SECTION 5.7. Public Announcements. On and prior to the Closing Date,
Purchaser and Seller shall advise and confer with each other prior to the
issuance of any reports, statements or releases concerning this Agreement
(including the exhibits hereto) and the transactions contemplated hereby.
Purchaser and Seller will agree in good faith on the text and timing of any
public disclosure prior to the Closing or with respect to such matters, except
as may be required by law, court process, securities exchange listing agreement
or the rules of the National Association of Securities Dealers.
SECTION 5.8. Books and Records. If, in order properly to prepare
documents required to be filed with governmental authorities (including Tax
authorities) or its financial statements, it is necessary that any party hereto
or any successors be furnished with additional information relating to the
Business Assets, and such information is in the possession of any other party
hereto, such party agrees to use all commercially reasonable efforts to promptly
furnish such information to the party needing such information, at the cost and
expense of the party being furnished such information. From and after the
Effective Date and continuing after the Closing, Seller shall cooperate with
Purchaser and provide to Purchaser at Purchaser's expense all financial
information that may be required to enable Purchaser to comply with all
applicable laws, rules and regulations, and any governmental filing
requirements, with respect to reporting and reflecting the transactions
contemplated by this Agreement and the Ancillary Agreements.
SECTION 5.9. Regulatory and Other Authorizations; Consents.
(a) Efforts. Each party hereto will use all commercially reasonable
efforts to obtain all authorizations, consents, orders and approvals of all
federal, state and local regulatory bodies and officials that may be or become
necessary for the execution and delivery of, and the performance of its
obligations pursuant to, this Agreement and the Ancillary Agreements and will
cooperate fully with the other party in promptly seeking to obtain all such
authorizations, consents, orders and approvals. Each party hereto agrees to make
an appropriate filing of a Notification and Report Form pursuant to the HSR Act
with respect to the transactions contemplated hereby as promptly as is
practicable after the date hereof and to supply promptly any additional
information and documentary material that may be requested by any governmental
authority pursuant to the HSR Act. The parties hereto will not take any action
that will have the effect of delaying, impairing or impeding the receipt of any
required approvals. Without limiting the generality of the parties' undertakings
pursuant to this Section, the parties shall use all commercially reasonable
efforts to prevent the entry in a judicial or administrative proceeding brought
under any antitrust or similar law by the Federal Trade Commission, the
Department of Justice or any other United States federal or state, or non-U.S.
government or governmental authority (an "ANTITRUST AUTHORITY") or any other
party of any permanent or preliminary injunction or other order that would make
consummation of the acquisition of the Purchased Assets in accordance with the
terms of this Agreement unlawful or that would prevent or delay such
consummation. In connection therewith, if any administrative or judicial action
or proceeding is instituted (or threatened to be instituted) challenging any
transaction contemplated by this Agreement as violative of any antitrust or
similar law, each of the parties hereto shall cooperate and use all commercially
reasonable efforts to contest and resist any such action or proceeding and to
have vacated, lifted, reversed, or overturned any decree, judgment, injunction
or other order, whether
<PAGE> 17
temporary, preliminary or permanent, that is in effect and that prohibits,
prevents, or restricts consummation of any such transaction, unless by mutual
agreement the parties decide that litigation is not in their respective best
interests.
(b) Communications. Each party hereto shall promptly inform the other of
any communication between such party and an Antitrust Authority regarding any of
the transactions contemplated hereby. If any party or any affiliate of such
party receives a request for additional information or for documents or any
material from an Antitrust Authority, or an Antirust Authority makes any
objection with respect to the transactions contemplated hereby, then such party
shall use all commercially reasonable efforts to promptly resolve such request
or such objections. Each party shall use all commercially reasonable efforts to
provide prior disclosure to, and coordinate with the other parties and their
counsel in connection with the submission of written materials by such party to
an Antitrust Authority in connection with HSR Act compliance or the merger
control or competition regulations of any other country, and prior to initiating
any oral communications with such Antitrust Authorities by such party. Each
party hereto will cooperate in connection with reaching any understandings,
undertakings or agreements (oral or written) involving an Antitrust Authority in
connection with the transactions contemplated hereby.
SECTION 5.10. Taxes. To the extent that failure to do so could
materially adversely affect the Business Assets, Seller shall, (a) continue to
file within the time period for filing all returns and reports relating to
Taxes, and such returns and reports shall be true, correct and complete, and (b)
pay when due any and all Taxes attributable to or levied or imposed upon the
Business Assets for periods (or portions thereof) through the Closing Date.
SECTION 5.11. Export Compliance. Without prior authorization of the
United States Office of Export Administration, neither Seller nor Purchaser
shall knowingly export or reexport (including but not limited to delivery to a
foreign national) directly or indirectly any technical data received from the
other party, any technical data relating to the commodities received from the
other party or any immediate products (including processes and services)
produced directly by use of any of such technical data to any country to the
extent such export or reexport violates the Export Control Regulations of the
Bureau of International Commerce of the United States Department of Commerce.
SECTION 5.12. No Other Bids. Until the earlier to occur of (a) the
Closing or (b) the termination of this Agreement pursuant to its terms, Seller
shall not, and Seller shall not authorize any of its officers, directors,
employees, agents or other representatives to, directly or indirectly, (i)
initiate, solicit or encourage (including by way of furnishing evaluation
material or other information regarding the Desktop Peripherals Business or the
Business Assets) any inquiries, or make any statements to third parties which
may reasonably be expected to lead to any proposal, concerning the sale of the
Desktop Peripherals Business or all or a portion of the Business Assets, or (ii)
negotiate, engage in any substantive discussions, or enter into any agreement,
with any person concerning the sale of the Business Assets.
SECTION 5.13. Accounts Receivable.
(a) Promptly, but in no event more than fifteen business days, following
the Effective Date, Purchaser shall arrange with a bank or other financial
institution approved in writing by Seller (THE "A/R BANK") to open a "lockbox"
bank account (THE "LOCKBOX ACCOUNT") for the purpose of receiving payments of
accounts receivable in respect of the Desktop Peripherals
<PAGE> 18
Business, including the Closing Accounts Receivable. Seller and Purchaser shall
agree in good faith upon written instructions to be given to the A/R Bank (which
shall be irrevocable unless rescinded by both Seller and Purchaser) which shall
provide that (i) all deposits to and withdrawals from such account shall be
promptly reported to both Seller and Purchaser, (ii) that such account shall be
managed in accordance with the provisions of this Section, and (iii) that upon
receipt of written notice by either Seller or Purchaser that a dispute regarding
such account has arisen between the parties, that no amounts shall be paid out
of such account until the A/R Bank has received written notice from both parties
that such dispute has been resolved.
(b) Not less than two days prior to the Closing, Seller shall deliver to
Purchaser a detailed summary (by customer and Product) of the Closing Accounts
Receivable. Immediately following the Closing, Seller shall send to each
customer of the Desktop Peripherals Business who owes a receivable included in
the Closing Accounts Receivable (such receivable, a "RCAR"), an instruction that
all receivables in respect of Products sold to such customer shall be paid to
the Lockbox Account. Purchaser will use its good faith efforts to have each such
customer pay in full all receivables included in the Closing Accounts
Receivable. The parties agree that for any customer which has a RCAR, all
payments received from or on behalf of such customer for a Product which is
included in a RCAR (whether or not such payment is in respect of the RCAR) shall
be allocated to the RCAR for such Product of such customer. Upon payment in full
of all RCARs of a customer, Purchaser shall have no further obligations under
this Section in respect of the receivables of such customer.
(c) The A/R Bank shall promptly transfer all payments deposited into the
Lockbox Account in respect of RCARs (or allocated to RCARs pursuant to paragraph
(b) of this Section) 95 % to Seller and 5% to Purchaser. Purchaser will allow
Seller and its representatives to have reasonable access to the books and
records of Purchaser in order to verify ongoing compliance by Purchaser with its
covenants set forth in this Section.
SECTION 5.14. Third Party Software. In respect of any software owned by
a third party and loaded on any hardware purchased by Purchaser under this
Agreement, Purchaser shall promptly either obtain a license for such software or
destroy such software. Purchaser shall be liable for, and shall indemnify and
hold harmless Seller from, any and all liabilities and expenses (including the
fees and expenses of counsel) arising in connection with Purchaser's failure to
obtain such licenses or destroy such software.
SECTION 5.15. Third Party Tools. Seller shall use all commercially
reasonable efforts to have licenses to the third party tools (as set forth in
Schedule 13) transferred to Purchaser, which licenses shall be in an amount
approximately equal to the number of Hired Employees.
SECTION 5.16. Survival of Covenants. Each of the covenants set forth in
Sections 5.4, 5.5, 5.6, 5.7, 5.8, 5.10, 5.12, 5.13, 5.14, 5.15 and 5.16 shall
survive the Closing. The covenants set forth in Sections 5.6(a) and 5.7 shall
survive the termination or expiration of this Agreement according to their
terms.
<PAGE> 19
ARTICLE VI
EMPLOYEE MATTERS
SECTION 6.1. Offers to Employees; Hired Employees.
(a) Within ten business days after the Effective Date, Purchaser agrees
to make written offers of employment to at least 90% of the Employees, which
offers ("QUALIFIED OFFERS") shall contain (i) salary and benefits terms in the
aggregate comparable to, or more favorable to the Employee than, the terms of
such Employee's employment with Seller and (ii) any other terms and conditions
agreed upon in writing by Seller and Purchaser. Each Qualified Offer shall be
contingent upon, and effective upon, the Closing. Seller agrees that, from the
Effective Date and continuing until the earlier of the Closing Date or the
termination of this Agreement according to its terms, Seller will provide
Purchaser with reasonable access to and the opportunity to meet and interview
each Employee for the purposes of (i) negotiating offers of employment
contingent upon the Closing and (ii) identifying the assets and tools used by
such Employee in the ordinary course of performing services in the Desktop
Peripherals Business. Upon any termination of this Agreement, the
non-solicitation and non-employment provisions of the Confidentiality Agreement
shall be in full force and effect.
(b) An Employee hired by Purchaser pursuant to a Qualified Offer shall
be referred to herein as a "HIRED EMPLOYEE." Purchaser agrees that each Hired
Employee shall, for the purposes of any benefits or privileges accruing to
employees of Purchaser or its affiliates based upon seniority or length of
service, be given full credit for such Hired Employee's period of employment
with Seller, and that each Qualified Offer shall include such commitment.
SECTION 6.2. Employee Obligations of Purchaser. Purchaser shall be
liable for and shall indemnify and hold Seller and its affiliates harmless from,
any and all liabilities with respect to (i) the employment by Purchaser or
termination of employment by Purchaser of any past, current or future employee
or consultant of Purchaser or any of its affiliates, including without
limitation, Hired Employees after the Closing Date (collectively, "PURCHASER
EMPLOYEES"), whether in connection with the transactions contemplated hereby or
otherwise; (ii) any claims of discrimination under state or federal law arising
from a Purchaser Employee's employment or service with or termination by
Purchaser; (iii) any withholding or employment Taxes with respect to any
Purchaser Employees which accrue or become payable during the period of such
Purchaser Employee's employment or service with Purchaser or any affiliate of
Purchaser or arise out of the termination of such person's employment with
Purchaser or any affiliate of Purchaser; (iv) any other claims or obligations
arising out of the terms and conditions of employment by Purchaser or any of its
affiliates of any Purchaser Employee, whether for salary, wages, bonuses, profit
sharing, commissions, severance, vacation pay, sick pay or otherwise; or (v) any
duties or obligations of Purchaser or administrators under any existing or
future employee benefit plans or arrangements maintained by Purchaser with
respect to Purchaser Employees. Purchaser shall be responsible for filing all
employment Tax returns with respect to Purchaser Employees attributable to
periods of employment or service with Purchaser or any affiliate of Purchaser.
<PAGE> 20
SECTION 6.3. Employee Obligations of Seller.
(a) Seller shall be liable for and shall indemnify and hold Purchaser
and its affiliates harmless from, any and all liabilities with respect to: (i)
the employment by Seller or termination of employment by Seller of any past,
current or future employee or consultant of Seller or any of its affiliates
(collectively, "SELLER EMPLOYEES"); (ii) any claims of discrimination under
state or federal law arising from a Seller Employee's employment or service with
or termination by Seller; (iii) any withholding or employment Taxes with respect
to any Seller Employees which accrue or become payable during the period of such
Seller Employee's employment or service with Seller or any affiliate of Seller
or arise out of the termination of such person's employment with Seller or any
affiliate of Seller; (iv) any other claims or obligations arising out of the
terms and conditions of employment by Seller or any of its affiliates of any
Seller Employee, whether for salary, wages, bonuses, profit sharing,
commissions, severance, vacation pay, sick pay or otherwise; or (v) any duties
or obligations of Seller or administrators under any existing or future employee
benefit plans or arrangements maintained by Seller with respect to Seller
Employees. Seller shall be responsible for filing all employment Tax returns
with respect to Seller Employees attributable to periods of employment or
service with Seller or any affiliate of Seller.
(b) Seller shall pay to all Employees (including, without limitation,
Hired Employees) terminated by Seller, any liability for accrued vacation, sick
leave or similar accrued benefits with respect to such Employees attributable to
periods of employment or service with Seller, consistent with Seller's policies
and applicable law, and shall make such payment within the statutory time period
therefor.
(c) Seller agrees to comply with the provisions of any statute or
regulation regarding termination of employment, plant closing or layoffs and to
perform all obligations required by Seller with respect to the cessation of any
operations of the Desktop Peripherals Business or the termination,
re-assignment, re-location or change in position of any Employee in connection
with the transactions contemplated hereby.
SECTION 6.4. No Solicitation; No Hire. Except as provided by law, for a
period of one year after the Closing Date, without Purchaser's written
permission, Seller shall not actively solicit any Employee to become an employee
of Seller or any Hired Employee to terminate his or her employment with
Purchaser. For purposes of this Section, the term "actively solicit" shall not
mean or include the placement of advertisements, participation in career days,
utilizing headhunters or placement agencies or responding to unsolicited
inquiries, applications or resumes. Seller shall not hire or rehire for a period
of ninety days after the Closing any Employee to whom Purchaser makes a
Qualified Offer.
SECTION 6.5. Survival. Each of the agreements and covenants set forth in
this Article VI shall survive the Closing.
ARTICLE VII
TAX MATTERS
SECTION 7.1. Transaction Taxes. Purchaser shall be responsible for, and
shall defend, indemnify and hold harmless Seller from and against any and all
excise, value added, registration,
<PAGE> 21
stamp, property, documentary, transfer, sales, use and similar Taxes, levies,
charges and fees (including all real estate transfer taxes) incurred, or that
may be payable to any taxing authority, in connection with, the transactions
contemplated by this Agreement (collectively, "TRANSACTION TAXES"). Seller and
Purchaser shall use all commercially reasonable efforts to cooperate in order to
minimize the Transaction Taxes and any Taxes to be paid or withheld in
connection with the transactions contemplated by the License Agreement.
SECTION 7.2. Other Taxes. Seller is and shall remain solely responsible
for all tax matters arising from or relating to the Purchased Assets and related
businesses on or prior to the Closing Date ("PRE-CLOSING PERIOD"). Seller shall
indemnify and hold harmless Purchaser from any liability for, or arising out of
or based upon, or relating to any Tax matter arising from the Purchased Assets
and related businesses during the Pre-Closing Period. Purchaser shall be solely
responsible for all tax matters arising from or relating to the Purchased Assets
and related businesses beginning after the Closing Date ("POST-CLOSING PERIOD").
Purchaser shall indemnify and hold harmless Seller from any liability for, or
arising out of or based upon, or relating to any Tax matter arising from the
Purchased Assets and related businesses during the Post-Closing Period. Seller
and Purchaser shall cooperate concerning all tax matters relating to this
division of responsibility, including, but not limited to, the filing of Tax
returns and other governmental filings associated therewith.
ARTICLE VIII
CONDITIONS TO THE CLOSING
SECTION 8.1. Conditions to Obligations of Seller. The obligations of
Seller to consummate the transactions contemplated by this Agreement shall be
subject to the fulfillment, at or prior to the Closing, of each of the following
conditions:
(a) Accuracy of Representations and Warranties; Covenants. The
representations and warranties of Purchaser contained in Article IV of this
Agreement (as qualified by Purchaser's Disclosure Letter) shall be true and
correct in all material respects as of the Closing, with the same force and
effect as if made as of the Closing, and all the covenants contained in this
Agreement to be complied with by Purchaser on or before the Closing shall have
been complied with in all material respects, and Seller shall have received a
certificate of Purchaser, dated as of the Closing Date, to such effect signed by
an officer thereof.
(b) HSR Act; No Order. Any waiting periods under the HSR Act applicable
to the transactions contemplated by this Agreement shall have expired or been
terminated. No federal, state or other governmental authority or other agency or
commission or federal, state or other court of competent jurisdiction shall have
enacted, issued, promulgated, enforced or entered any statute, rule, regulation,
injunction or other order (whether temporary, preliminary or permanent) which is
in effect and has the effect of making the transactions contemplated by this
Agreement and/or the Ancillary Agreements illegal or otherwise restraining or
prohibiting consummation of such transactions; provided, however, that the
parties hereto shall use all commercially reasonable efforts to have any such
order or injunction vacated.
(c) Opinion. Seller shall have received an opinion of Purchaser's
counsel with respect to each of the matters set forth in EXHIBIT F hereto.
<PAGE> 22
SECTION 8.2. Conditions to Obligations of Purchaser. The obligations of
Purchaser to consummate the transactions contemplated by this Agreement shall be
subject to the fulfillment, at or prior to the Closing, of each of the following
conditions:
(a) Accuracy of Representations and Warranties; Covenants. The
representations and warranties of Seller contained in Article III of this
Agreement (as qualified by Seller's Disclosure Letter) shall be true and correct
in all material respects as of the Closing, with the same force and effect as if
made as of the Closing, and all the covenants contained in this Agreement to be
complied with by Seller on or before the Closing shall have been complied with
in all material respects, and Purchaser shall have received a certificate of
Seller, dated as of the Closing Date, to such effect signed by an officer
thereof.
(b) HSR Act; No Order. Any waiting periods under the HSR Act applicable
to the transactions contemplated by this Agreement shall have expired or been
terminated. No federal, state or other governmental authority or other agency or
commission or federal, state or other court of competent jurisdiction shall have
enacted, issued, promulgated, enforced or entered any statute, rule, regulation,
injunction or other order (whether temporary, preliminary or permanent) which is
in effect and has the effect of making the transactions contemplated by this
Agreement and/or the Ancillary Agreements illegal or otherwise restraining or
prohibiting consummation of such transactions; provided, however, that the
parties hereto shall use all commercially reasonable efforts to have any such
order or injunction vacated.
(c) Opinion. Purchaser will have received an opinion of AIM's counsel,
Fenwick & West LLP, with respect to each of the matters set forth in EXHIBIT G
hereto.
(d) Inventory. Seller shall have determined the Inventory Adjustments
and calculated the Net Inventory Price Adjustment, and delivered to Purchaser a
detailed summary thereof, certified by an officer of Seller as true, accurate
and complete.
(e) No Material Adverse Change. There shall have been no material
adverse change in or with respect to the value of the Business Assets.
ARTICLE IX
TERMINATION AND WAIVER
SECTION 9.1. Termination. This Agreement may be terminated at any time
prior to the Closing:
(a) by the mutual written consent of Seller and Purchaser; or
(b) by either Seller or Purchaser at any time prior to Closing, if the
other commits a material breach of this Agreement that is not cured within
twenty days after written notice thereof; or
(c) by either Seller or Purchaser, if the Closing shall not have
occurred prior to the six month anniversary of the Effective Date; provided,
however, that the right to terminate this Agreement under this Section 9.1(c)
shall not be available to any party whose failure to fulfill any
<PAGE> 23
obligation under this Agreement shall have been the cause of, or shall have
resulted in, the failure of the Closing to occur prior to such date; or
(d) by either Seller or Purchaser if a permanent injunction or other
order by any federal, state or foreign court of competent jurisdiction which
would make illegal or otherwise restrain or prohibit the consummation of the
transactions contemplated by this Agreement and the Ancillary Agreements shall
have been issued and shall have become final and nonappealable.
SECTION 9.2. Effect of Termination. In the event of termination of this
Agreement as provided in Section 9.1, this Agreement shall forthwith become void
(excepting only those provisions hereof that by their terms survive the
termination of this Agreement) and there shall be no liability on the part of
any party hereto; provided that nothing herein shall relieve either party from
liability for any willful breach hereof.
SECTION 9.3. Waiver. At any time prior to the Closing, any party hereto
may (a) extend the time for the performance of any of the obligations or other
acts of the other parties hereto, (b) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto, or (c) waive compliance with any of the agreements or
conditions contained herein. Any such extension or waiver shall be valid if set
forth in an instrument in writing signed by the party to be bound thereby.
ARTICLE X
INDEMNIFICATION
SECTION 10.1. Loss Defined; Indemnitees. For purposes of this Article X,
the term "LOSS" will mean and include any and all liability, loss, damage,
claim, expense, cost, fine, fee, penalty, obligation, injury or amounts paid in
settlement, together with reasonable costs and expenses, including the
reasonable attorneys' and experts' fees, court costs, arbitration costs, filing
fees and other legal costs and expenses relating thereto. As used in this
Article X, the term "PURCHASER INDEMNITEES" means and includes Purchaser and any
present or future officer, director, employee, affiliate, stockholder or agent
of Purchaser and its successors and assigns. As used in this Article X, the term
"SELLER INDEMNITEES" means and includes Seller and any present or future
officer, director, employee, affiliate, stockholder or agent of Seller and its
successors and assigns.
SECTION 10.2. Indemnification by Seller. Seller agrees, subject to the
other terms, conditions and limitations of this Agreement (including the
provisions of Section 10.6(a) hereof), to indemnify the Purchaser Indemnitees
against, and to hold the Purchaser Indemnitees harmless from, all Loss arising
out of, resulting from, caused by or attributable to:
(a) the failure of any representation or warranty of Seller contained in
this Agreement, (including any schedule or exhibit hereto), to be true and
correct as of the Effective Date or as of the Closing Date or the failure of any
representation or warranty contained in the Ancillary Agreements to be true and
correct as of the Closing Date;
(b) the breach or violation by Seller of any covenant or agreement of
Seller contained in this Agreement (including any schedule or exhibit hereto) or
the Ancillary Agreements;
<PAGE> 24
(c) except for the Assumed Liabilities, the operation or management of
the Desktop Peripherals Business or the Business Assets at any time or times on
or prior to the Closing Date and, except as otherwise provided in Article VI
hereof, any charges or actions brought by employees, agents or representatives
of Seller arising out of or based upon events occurring on or prior to the
Closing Date;
(d) any material Encumbrance upon the Purchased Assets existing at the
Closing;
(e) any of the Excluded Assets or any other obligation or liability of
Seller not expressly assumed by Purchaser under this Agreement or the Ancillary
Agreements; or
(f) liability for noncompliance with any bulk sales, bulk transfer or
fraudulent conveyance laws applicable to the transactions contemplated by this
Agreement.
SECTION 10.3. Indemnification by Purchaser. Purchaser agrees, subject to
the other terms, conditions and limitations of this Agreement (including the
provisions of Section 10.6(b) hereof), to indemnify the Seller Indemnitees
against, and to hold the Seller Indemnitees harmless from, all Loss arising out
of, resulting from, caused by or attributable to:
(a) the failure of any representation or warranty of Purchaser contained
in this Agreement (including any schedule or exhibit hereto), to be true and
correct as of the Effective Date or as of the Closing Date or the failure of any
representation or warranty contained in the Ancillary Agreements to be true and
correct as of the Closing Date;
(b) the breach or violation by Purchaser of any covenant or agreement of
Purchaser contained in this Agreement (including any schedule or exhibit hereto)
or the Ancillary Agreements;
(c) the Assumed Liabilities (provided that Warranty Claims shall be
covered under the provisions of Section 10.4); or
(d) the operation of the Desktop Peripherals Business and sale and
license of the Products by Purchaser after the Closing Date.
SECTION 10.4. Warranty Claims. Seller and Purchaser acknowledge that,
after the Closing, Purchaser will be in a better position to satisfy any
warranty claim, product liability claim or any other claim that is made or
asserted by any third party that relates to any product defects of any of the
Products, or any returned Products (collectively, "WARRANTY CLAIMS"). Purchaser
agrees to satisfy all Warranty Claims, and, without regard to the provisions of
Section 10.6(b), indemnify the Seller Indemnitees against, and to hold the
Seller Indemnitees harmless from, all Loss arising out of, resulting from,
caused by or attributable to any Warranty Claims, whether arising out of the
sale by Seller of Products prior to the Closing ("PRE-CLOSING WARRANTY CLAIMS"),
or the sale of Products by Purchaser after the Closing; provided, that, with
respect to Losses arising out of Pre-Closing Warranty Claims: (1) Purchaser
shall indemnify and hold the Seller Indemnitees harmless only for the first
$150,000 of such Pre-Closing Warranty Claims, and (2) subject to the
satisfaction of such $150,000 amount, Seller shall indemnify and hold the
Purchaser Indemnitees harmless from all Losses arising out of Pre-Closing
Warranty Claims in excess of such $150,000 amount. The Purchaser Indemnitees may
not bring any claim for indemnification by Seller under this Section 4 in
respect of Pre-Closing Warranty Claims after the one year anniversary of the
Closing Date.
<PAGE> 25
SECTION 10.5. Procedures for Indemnification.
(a) As used herein, an "INDEMNIFIED PARTY" means a Purchaser Indemnitee
seeking indemnification pursuant to Section 10.2 hereof or a Seller Indemnitee
seeking indemnification pursuant to Section 10.3 hereof. The Indemnified Party
agrees to give the other party ("INDEMNITOR") prompt written notice of any
event, or any claim, action, suit, demand, assessment, investigation,
arbitration or other proceeding by or in respect of a third party (a "THIRD
PARTY CLAIM") of which it has knowledge, for which such Indemnified Party is
entitled to indemnification under this Article X (including in any case copies
of any summons, complaint or other pleading which may have been served on it and
any written claim, demand, invoice, billing or other document evidencing or
asserting the same). No delay on the part of an Indemnified Party in giving the
Indemnitor notice of a Third Party Claim shall relieve the Indemnitor from any
obligation hereunder unless the Indemnitor is prejudiced thereby.
(b) Within twenty days of delivery of such written notice, the
Indemnitor may, at the expense of the Indemnitor, elect to take all necessary
steps properly to contest any Third Party Claim or to prosecute such Third Party
Claim to conclusion or settlement; provided, that without the prior written
consent of an Indemnified Party, the Indemnitor will not enter into any
settlement of a Third Party Claim which would lead to liability or create any
financial or other obligation on the part of such Indemnified Party for which
such Indemnified Party is not indemnified hereunder. If the Indemnitor makes the
foregoing election, an Indemnified Party will have the right to participate at
its own expense in all proceedings. If the Indemnitor does not make such
election or if the Indemnitor fails to take reasonable steps necessary to
diligently defend such Third Party Claim within twenty days after receiving
notice from the Indemnified Party that the Indemnified Party believes that the
Indemnitor has failed to take such steps, an Indemnified Party shall be free to
handle the prosecution or defense of any such Third Party Claim, will take all
necessary steps to contest the Third Party Claim or to prosecute such Third
Party Claim to conclusion or settlement satisfactory to such Indemnified Party
at the sole cost and expense of the Indemnitor (including reasonable attorney's
and expert's fees and expenses and court and arbitration costs), will notify the
Indemnitor of the progress of any such Third Party Claim, will permit the
Indemnitor, at the sole cost of the Indemnitor, to participate in such
prosecution or defense and will provide the Indemnitor with reasonable access to
all relevant information and documentation relating to the Third Party Claim and
the prosecution or defense thereof. In any case, the party not in control of the
Third Party Claim will cooperate with the other party in the conduct of the
prosecution or defense of such Third Party Claim. Notwithstanding the foregoing,
if an Indemnified Party is offered a written settlement proposal by a third
party that has as its sole component the payment of money by the Indemnified
Party and the Indemnitor recommends to the Indemnified Party in writing that it
accept such settlement proposal (the "SANCTIONED SETTLEMENT") and the
Indemnified Party refuses to accept such settlement proposal, in such event if
the ultimate settlement terms agreed to by the Indemnified Party with such third
party or the final monetary damages award against the Indemnified Party (either,
a "FINAL SETTLEMENT AMOUNT"), is greater than the amount of the Sanctioned
Settlement, the Indemnified Party shall be responsible for the differential
between the Final Settlement Amount and the Sanctioned Settlement and the
Indemnitor's liability shall be limited to the amount specified in the
Sanctioned Settlement.
<PAGE> 26
SECTION 10.6. Limitations on Indemnification.
(a) Limits on Seller Indemnification.
(i) Seller shall not be required to provide indemnification under
Section 10.2 unless and until the aggregate Loss for which one or more Purchaser
Indemnitees seeks indemnification thereunder exceeds an aggregate of five
hundred thousand dollars ($500,000), in which event Seller shall be liable to
indemnify the Purchaser Indemnitees for aggregate Loss which exceeds five
hundred thousand dollars ($500,000).
(ii) The maximum aggregate Loss recoverable by Purchaser Indemnitees
(considered together as a group) against Seller under Section 10.2 and 10.4, in
the aggregate, shall not exceed ten million dollars ($10,000,000).
(b) Limits on Purchaser Indemnification.
(i) Purchaser shall not be required to provide indemnification under
Section 10.3 unless and until the aggregate Loss for which one or more Seller
Indemnitees seeks indemnification thereunder exceeds an aggregate of five
hundred thousand dollars ($500,000), in which event Purchaser shall be liable to
indemnify the Seller Indemnitees for aggregate Loss which exceeds five hundred
thousand dollars ($500,000).
(ii) The maximum aggregate Loss recoverable by Seller Indemnitees
(considered together as a group) against Purchaser under Section 10.3 and 10.4,
in the aggregate, shall not exceed ten million dollars ($10,000,000).
(c) Time Limits. Notwithstanding anything herein to the contrary, no
claim for indemnification under Sections 10.2 or 10.3 may be brought after the
two year anniversary of the Closing Date.
SECTION 10.7. Exclusive Remedy. From and after the Closing Date, the
foregoing provisions of Article X, together with the other specific
indemnifications and allocations of liability specified in other Sections or
Articles of this Agreement and/or the Ancillary Agreements, are the sole and
exclusive remedy of an Indemnified Party for a breach of a representation,
warranty, covenant or agreement of the other party contained in this Agreement
or any Ancillary Agreement.
ARTICLE XI
DISPUTE RESOLUTION
SECTION 11.1. Management Negotiation.
(a) Purchaser and Seller shall attempt to resolve disputes between the
Purchaser and the Seller arising out of or in connection with this Agreement
through good faith negotiations as provided herein. The parties agree that
disputes shall be fully discussed by representatives of Purchaser and the Seller
involved in the dispute in an attempt to achieve a prompt resolution of such
dispute. In the event that such dispute shall not be promptly resolved by the
mutual agreement of such representatives, the dispute shall be submitted to
senior management representatives of Purchaser and Seller. Such senior
management
<PAGE> 27
representatives of Purchaser and Seller shall meet and fully discuss such
dispute in an attempt to achieve a prompt resolution of the dispute. If such
dispute is not promptly resolved by the mutual agreement of such senior
management representatives of Purchaser and Seller, Purchaser and Seller shall
be free to exercise any of the remedies available to it (i) pursuant to the
terms of this Agreement or (ii) otherwise at law or in equity.
(b) Purchaser and Seller acknowledge that, from time to time, certain
material disputes arising out of or in connection with this Agreement may
objectively require immediate resolution. Accordingly, any such dispute may, at
the option of either the Purchaser or the Seller, be processed through an
abbreviated mediation process. Such abbreviated mediation process shall entail
submitting any such dispute to the senior management representatives of each of
the Purchaser and Seller designated by each of the Purchaser and the Seller for
a prompt and expeditious resolution. In the event that a prompt and expeditious
resolution of such dispute is not achieved through the mutual agreement of such
senior management representatives of the Purchaser and the Seller, Purchaser and
Seller shall be free to exercise any of the remedies available to it (i)
pursuant to the terms of this Agreement or (ii) otherwise at law or in equity.
(c) Purchaser and Seller agrees to act reasonably and in good faith in
connection with all matters arising out of or in connection with this Agreement
that are submitted to the mediation process set forth in this Article XI.
SECTION 11.2. Waiver of Jury Trial. The parties hereby waive trial by
jury in any litigation in any court with respect to, in connection with, or
arising out of this Agreement, the Ancillary Agreements or the transactions
contemplated thereby.
ARTICLE XII
GENERAL PROVISIONS
SECTION 12.1. Expenses. All costs and expenses, including, without
limitation, fees and disbursements of counsel, financial advisors and
accountants, incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such costs and
expenses, whether or not the Closing shall have occurred.
SECTION 12.2. Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given or made by
delivery in person, by courier service, by telecopy (confirmed in writing), or
by registered or certified mail (postage prepaid, return receipt requested), and
shall be deemed to have been duly given or made upon actual delivery, or if
mailed by registered or certified mail, on the third business day following
deposit in the mails, to the parties at the following addresses (or at such
other address for a party as shall be specified by like notice):
<PAGE> 28
(a) if to Seller:
Adaptec, Inc.
691 South Milpitas Blvd.
Milpitas, California 95035
Attention: General Counsel
Telecopy: 408-957-7137
with a copy to:
Fenwick & West LLP
Two Palo Alto Square
Palo Alto, California 94306
Attention: Dennis R. DeBroeck
Timothy A. Covington
Telecopy: 650-494-1417
(b) if to Purchaser:
STMicroelectronics, Inc.
1310 Electronic Drive
Carollton, Texas 75006
Attention: General Counsel
Telecopy: 972-466-7044
SECTION 12.3. Headings; Disclosure. The headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. A disclosure made in any section of
Purchaser's Disclosure Letter or Seller's Disclosure Letter, respectively, with
respect to a representation made in this Agreement may apply to or qualify any
other representation made by such party in this Agreement.
SECTION 12.4. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in a mutually acceptable
manner in order that the transactions contemplated hereby be consummated as
originally contemplated to the greatest extent possible.
SECTION 12.5. Survival. The representation and warranties made herein
shall survive until the two year anniversary of the Closing Date.
SECTION 12.6. Entire Agreement. This Agreement, the Ancillary
Agreements, the Confidentiality Agreement and any other written agreement
between Seller and Purchaser entered into contemporaneously with this Agreement
constitute the entire agreement and understanding of the parties hereto with
respect to the subject matter hereof and supersede all prior agreements and
undertakings with respect to the subject matter hereof, both written and oral.
<PAGE> 29
SECTION 12.7. Assignment. This Agreement shall not be assigned by
Purchaser or Seller without the prior written consent of the non-assigning
party; provided, however, that, subject to the parties' obligations under
Section 7.1, either party may assign all or a portion of its rights and
obligations hereunder to one or more wholly-owned subsidiaries or affiliates of
such party. Any purported assignment not permitted by this Section shall be
void.
SECTION 12.8. No Third-Party Beneficiaries. This Agreement is for the
sole benefit of the parties hereto and their permitted assigns and nothing
herein, express or implied, is intended to or shall confer upon any other person
or entity, including but not limited to any Employee or Hired Employee, any
legal or equitable right, benefit or remedy of any nature whatsoever under or by
reason of this Agreement. No statement, reference or disclosure set forth in
this Agreement, the Ancillary Agreements or the exhibits or schedules thereto
constitutes an admission (express or implied) of any liability or obligation of
the parties hereto to any third party, nor an admission (express or implied)
against any such party's interests.
SECTION 12.9. Amendment; Waiver. This Agreement may not be amended or
modified except by an instrument in writing signed by Seller and Purchaser.
Waiver of any term or condition of this Agreement shall only be effective if in
writing and shall not be construed as a waiver of any subsequent breach or
waiver of the same term or condition, or a waiver of any other term or condition
of this Agreement.
SECTION 12.10. Governing Law; Jurisdiction and Venue. This Agreement
shall be governed by, and construed in accordance with, the internal laws of the
State of California applicable to contracts executed in and to be performed by
residents of California within that State. Each party irrevocably consents to
submit to the exclusive jurisdiction of any federal or state court located in
the State of California for any lawsuits, actions or proceedings with respect to
this Agreement or the transactions contemplated hereby. Each party irrevocably
agrees to waive any objection to the laying of venue in the federal or state
courts located in Santa Clara County, California, and further agrees not to
plead in any such court that any such lawsuit, action or proceeding has been
brought in an inconvenient forum. The provisions of this Section shall survive
termination of this Agreement.
SECTION 12.11. Counterparts. This Agreement may be executed in one or
more counterparts, and by the different parties hereto in separate counterparts,
each of which when executed shall be deemed to be an original but all of which
taken together shall constitute one and the same agreement.
SECTION 12.12. No Joint Venture. Nothing contained in this Agreement
will be deemed or construed as creating a joint venture or partnership between
the parties hereto. No party is by virtue of this Agreement authorized as an
agent, employee or legal representative of any other party. No party will have
the power to control the activities and operations of any other, and the
parties' status is, and at all times, will continue to be, that of independent
contractors with respect to each other. No party will have any power or
authority to bind or commit any other. No party will hold itself out as having
any authority or relationship in contravention of this Section.
SECTION 12.13. Bulk Sales. Purchaser waives compliance by Seller with
any applicable bulk sales or bulk transfer laws of any applicable jurisdiction.
<PAGE> 30
IN WITNESS WHEREOF, Seller and Purchaser have caused this Agreement to
be executed as of the date first written above by their respective officers
thereunto duly authorized.
ADAPTEC, INC.
ADAPTEC MFG. (S) PTE. LTD.
STMICROELECTRONICS, INC.
<PAGE> 31
EXHIBITS AND SCHEDULES
<TABLE>
<CAPTION>
EXHIBITS
- --------
<C> <S>
Exhibit A Form of Assignment and Assumption Agreement
Exhibit B Form of Bill of Sale
Exhibit C Form of Facilities Agreement
Exhibit D Form of License Agreement
Exhibit E Form of Manufacturing Agreement
Exhibit F Opinion of Purchaser's Counsel
Exhibit G Opinion of Seller's Counsel
Exhibit H Form of Patent Assignment
Exhibit I Form of Mask Work Assignment
SCHEDULES
- ---------
Schedule 1 Assumed Liabilities
Schedule 2 Intangible Assets
Schedule 3 Inventory
Schedule 4 Products
Schedule 5 Product Designs
Schedule 6 Seller Contracts
Schedule 7 Tangible Assets
Schedule 8 Purchased Technology Deliverables
Schedule 9 Required Consents
Schedule 10 Licenses
Schedule 11 Employees
Schedule 12 Customers
Schedule 13 Certain Excluded Assets
</TABLE>
<PAGE> 1
Exhibit 2.3
AMENDMENT NO. 1 TO ASSET ACQUISITION AGREEMENT
This AMENDMENT NO. 1, dated as of January 15, 1999 (this "AMENDMENT"),
amends the Asset Acquisition Agreement, dated as of November 24, 1998 (the
"AGREEMENT"), by and among Adaptec, Inc., a Delaware corporation ("AIM"),
Adaptec Mfg. (S) Pte. Ltd., a wholly-owned Singapore subsidiary of AIM ("AMS"
and, together with AIM, "SELLER") and STMicroelectronics, Inc., a Delaware
corporation ("PURCHASER"), and the schedules and exhibits thereto.
WHEREAS, Seller and Purchaser mutually desire to supplement and amend
certain provisions of the Agreement and the schedules and exhibits thereto, and
enter into certain other agreements, the parties agree as follows:
SECTION 1. Supplements and Amendments.
1.1. The definition of "Closing Accounts Receivable" in Section 1.1 of the
Agreement shall be deleted.
1.2. The definition of "Inventory" in Section 1.1 of the Agreement shall be
supplemented by adding to such definition the following sentences at the end
thereof:
Inventory shall also include certain engineering materials associated with
the Products, and the Net Inventory Price Adjustment shall be adjusted
upward for the aggregate actual cost to Seller of such engineering
materials. The summary of the Inventory Adjustments to be delivered by
Seller to Purchaser pursuant to Section 8.2(d) shall include a list of such
engineering materials and their purchase prices.
1.3. Section 2.3 of the Agreement shall be amended by inserting the
following immediately after "Adjustment" in the fourth line thereof: minus (z)
$216,730.
1.4. Section 2.5(i) of the Agreement shall be amended by inserting
immediately after the phrase "sole cost and expense" on the sixth line thereof:
"; and provided further, however, that Purchaser shall have the option to delay
the delivery of the Business Assets that will be utilized by its employees
located at Seller's Milpitas, California and Longmont, Colorado facilities until
the termination of the respective Occupancy License Agreements attached hereto
as Exhibit C."
1.5. Section 5.13 of the Agreement shall be deleted and replaced in its
entirety with the following:
Purchaser shall use all commercially reasonable efforts to assist Seller in
collecting all of Seller's accounts receivable, unbilled receivables, notes
and other amounts receivable from third parties in respect of Products sold
by Seller prior to the Closing.
<PAGE> 2
1.6. Section 5.15 of the Agreement (Third Party Tools) shall be deleted and
replaced in its entirety with the following:
Seller shall use all commercially reasonable efforts to have those portions
of the licenses to the third party tools specified in Schedule 13
transferred to Purchaser.
1.7. Section 12.14 of the Agreement shall be added as follows:
Purchaser shall use best efforts to provide Seller with binding,
non-cancelable purchase orders corresponding to the following Adaptec
purchase orders:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------
SUPPLIER CODE AIC # PO QTY TOTAL $ DESCRIPTION
-------- NAME ----- -- --- ------- -----------
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ADI: Pre-Amp 1304A 45035100 6 Wfrs $73,700 NRE + Eng. Wafers
--------------------------------------------------------------------------------------
TSMC: Pipeline B 43C97B 45036215 6 Wfrs $10,476 Eng. Wafers
--------------------------------------------------------------------------------------
TSMC: Meeker 8387A 45021362 12 Wfrs $12,960 Matrix Lot
--------------------------------------------------------------------------------------
</TABLE>
1.8. Schedule 1 to the Agreement (Assumed Liabilities) shall be
supplemented by adding to such schedule the following:
Relocation and other costs related to the former employees of Analog
Devices, Inc.
1.9. Schedule 2 to the Agreement (Intangible Assets) shall be supplemented
by adding the following three Patents to such schedule:
<TABLE>
<CAPTION>
- ------------------------------- ----------------------- ----------------------- ----------------------
Title Status Inventors Adaptec Code
- ------------------------------- ----------------------- ----------------------- ----------------------
<S> <C> <C> <C>
Efficient Interpolator For In Process Thomas Conway
High Speed Timing Recovery Jason Byrne
- ------------------------------- ----------------------- ----------------------- ----------------------
Digital Timing Recovery In Process Thomas Conway
Using Baud Rate Sampling Jason Byrne
- ------------------------------- ----------------------- ----------------------- ----------------------
A Reduced Computation Open Disclosure Kevin McCall
Method For Determining
The Signal Amplitude At
The Input Of An ADC
Samling At Twice Nyquist
- ------------------------------- ----------------------- ----------------------- ----------------------
</TABLE>
1.10. Schedule 2 to the Agreement (Intangible Assets) shall be supplemented
by adding the following Mask Works to such schedule:
2
<PAGE> 3
<TABLE>
<CAPTION>
Device Mask Work Registration
- ------ ----------------------
<S> <C>
4421AT MW 12-721
8323AQ MW 11-467
8325BM MW 12-789
8375BQ MW 11-682
8375BT MW 11-682
8381AQ MW 12-723
8381BT MW 13-594
8381BU MW 13-594
</TABLE>
1.11. Schedule 4 to the Agreement (Products) shall be supplemented by
adding the following Products to such schedule:
<TABLE>
<CAPTION>
--------------------------- -------------------------------
DEVICE STATUS
--------------------------- -------------------------------
<S> <C>
1394GB ENG
--------------------------- -------------------------------
4421AT PROD
--------------------------- -------------------------------
43C97AM EOL
--------------------------- -------------------------------
5460BP ENG
--------------------------- -------------------------------
5460C1P PROD
--------------------------- -------------------------------
5460C1V PROD
--------------------------- -------------------------------
5463AP ENG
--------------------------- -------------------------------
5463BP ENG
--------------------------- -------------------------------
8323AQ EOL
--------------------------- -------------------------------
8325BM PROD
--------------------------- -------------------------------
8375BQ EOL
--------------------------- -------------------------------
8375BT EOL
--------------------------- -------------------------------
8381AQ EOL
--------------------------- -------------------------------
8381BT EOL
--------------------------- -------------------------------
8381BU PROD
--------------------------- -------------------------------
8391BQ PROD
--------------------------- -------------------------------
8391BU PROD
--------------------------- -------------------------------
43C97 Rev C
--------------------------- -------------------------------
</TABLE>
1.12. Schedule 6 to the Agreement (Seller Contracts) shall be supplemented
by adding the following purchase orders to such schedule:
<TABLE>
<CAPTION>
SUPPLIER CODE NAME AIC # PO QTY TOTAL $ DESCRIPTION
- -------- --------- ----- -- --- -------------------
<S> <C> <C> <C> <C> <C>
Seiko: Twister 400D 45034478 1000 pcs $1,550 Production,Samples
Seiko: Twister 2 401A 45036225 125 pcs $18,540 NRE + Eng. Samples
Seiko: Twister 2 401A 45038065 500 pcs $1,660 Eng. Samples
TSMC: Fastcat2 5464A 45036210 42 Wfrs $150,385 NRE + Eng. Wafers
TSMC: Fastcat2 5464A 45038055 6 Wfrs $10,476 Matrix Wafers
TSMC: Fastcat2 5464A 45037541 384 Wfrs $558,720 Risk Buy Wafers on Hold
TSMC: Fastcat2 5464A 45037779 192 Wfrs $279,360 Risk Buy Wafers on Hold
Amkor Fastcat2 5464A 45037723 1300 pcs $2,015 Blind build Assembly
Ipac Fastcat2 5464A 45037901 650 pcs $5,500 Blind build Assembly
</TABLE>
3
<PAGE> 4
1.13. Schedule 6 to the Agreement (Seller Contracts) shall be
supplemented by adding the following agreement to such schedule:
- --------------------------------------------------------------------------------
Manufacturers' Representative Agreement between J-Tek corporation and Adaptec,
Inc. dated October 3, 1992 to the extent that such Manufacturers' Representative
Agreement references PTS-related matters.
- --------------------------------------------------------------------------------
1.14. Schedule 13 to the Agreement (Certain Excluded Assets), under the
heading "Third Party Tools", shall be deleted and replaced in its entirety by
the following:
4
<PAGE> 5
<TABLE>
<CAPTION>
- --------------------------------------------------------------- -----------------------------
Cadence Tools Number of Adaptec Seats
=============================================================== =============================
<S> <C>
Verilog 45
- --------------------------------------------------------------- -----------------------------
Leapfrog 2
- --------------------------------------------------------------- -----------------------------
Pearl 1
- --------------------------------------------------------------- -----------------------------
VHDL Import 1
- --------------------------------------------------------------- -----------------------------
Silicon Ensemble 3
- --------------------------------------------------------------- -----------------------------
Cell 3 1
- --------------------------------------------------------------- -----------------------------
Verifault 3
- --------------------------------------------------------------- -----------------------------
</TABLE>
<TABLE>
<CAPTION>
Synopsys Tools Number of Adapted Seats
=============================================================== =============================
<S> <C>
LAI (logic modeling) - 180186 H-VLOG 0 (not in use by Adaptec)
- --------------------------------------------------------------- -----------------------------
LAI (logic modeling) - TC514256 - VLOG 0 (not in use by Adaptec)
- --------------------------------------------------------------- -----------------------------
Synthesis (Design Compiler, Verilog HDL, Design Analyzer) 9
- --------------------------------------------------------------- -----------------------------
Primetime 2
- --------------------------------------------------------------- -----------------------------
Test Compiler 5
- --------------------------------------------------------------- -----------------------------
VHDL Compiler 3
- --------------------------------------------------------------- -----------------------------
Behavior Compiler 1
- --------------------------------------------------------------- -----------------------------
Test Generator 1
- --------------------------------------------------------------- -----------------------------
Design Ware 1
- --------------------------------------------------------------- -----------------------------
Time Mill 3
- --------------------------------------------------------------- -----------------------------
Pathmill 2
- --------------------------------------------------------------- -----------------------------
Powermill 1
- --------------------------------------------------------------- -----------------------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------- ------------------------------ -----------------------------
Vendor Tool Number of Adaptec Seats
================================ ============================== =============================
<S> <C> <C>
Chrysalis Formal Verification 1
(Chrysalis - equivalence
check)
- -------------------------------- ------------------------------ -----------------------------
Summit Vericov 2
- -------------------------------- ------------------------------ -----------------------------
Veritools Undertow 21
- -------------------------------- ------------------------------ -----------------------------
Adobe Framemaker 17
- -------------------------------- ------------------------------ -----------------------------
InterHDL Verilint 2
- -------------------------------- ------------------------------ -----------------------------
Mathworks Mathlab 5
- -------------------------------- ------------------------------ -----------------------------
SES SES Workbench Node lock license on server
that can support four users
- -------------------------------- ------------------------------ -----------------------------
Signal Scan (design 0 (not in use by Adaptec)
accelerator)
- -------------------------------- ------------------------------ -----------------------------
Smart model (TI 8990) 0 (not in use by Adaptec)
- -------------------------------- ------------------------------ -----------------------------
Chronology Timing Designer 0 (not in use by Adaptec)
- -------------------------------- ------------------------------ -----------------------------
Simucad Silos 2
- -------------------------------- ------------------------------ -----------------------------
Avant! Aquarius XL router 1
- -------------------------------- ------------------------------ -----------------------------
</TABLE>
5
<PAGE> 6
1.15. Exhibit D to the Agreement (Form of License Agreement) shall be
supplemented by supplementing Exhibit B (Licensed Patents) to the License
Agreement with the following one patent:
<TABLE>
<CAPTION>
- ------------------------------- ---------------------- ---------------------- ----------------------
Title Status Inventors Adaptec Code
- ------------------------------- ---------------------- ---------------------- ----------------------
<S> <C> <C> <C>
Gated Clock Flip-Flops In Process Lance Flake PTS-087/A
- ------------------------------- ---------------------- ---------------------- ----------------------
</TABLE>
1.16. Exhibit E to the Agreement (Form of Manufacturing Agreement) shall be
amended by amending Section 6.2, Exhibit A (Products, Initial Prices and Yield)
and Exhibit D (Engineering Support Services) to the Manufacturing Agreement as
follows:
Section 6.2:
Replace the sentence beginning "For purposes of this Section, . . .," with the
following: "For purposes of this Section, 'Yield' includes both wafer sort yield
and final test yield."
Exhibit A:
Delete the following rows:
<TABLE>
<CAPTION>
- ------------------- ------------------ -----------------
Product Initial Price Yield
- ------------------- ------------------ -----------------
<S> <C> <C>
43C97(1) $3.87
- ------------------- ------------------ -----------------
33C94 $2.02
- ------------------- ------------------ -----------------
</TABLE>
Add the following columns for wafer sort yield and final test yield:
<TABLE>
<CAPTION>
- ------------------- --------------------- -------------------
Product Wafer Sort Yield Final Test Yield
- ------------------- --------------------- -------------------
<S> <C> <C>
9535AQ 85 97
- ------------------- --------------------- -------------------
8391CU 90 96
- ------------------- --------------------- -------------------
8391CQ 90 99
- ------------------- --------------------- -------------------
8391BU 89 99
- ------------------- --------------------- -------------------
8391BQ 89 99
- ------------------- --------------------- -------------------
8387AM 83 99
- ------------------- --------------------- -------------------
8381CQ 94 99
- ------------------- --------------------- -------------------
8381BU 95 99
- ------------------- --------------------- -------------------
8381BQ 95 99
- ------------------- --------------------- -------------------
8375CT 92 99
- ------------------- --------------------- -------------------
8375BQ 94 99
- ------------------- --------------------- -------------------
8357AQ 78 89
- ------------------- --------------------- -------------------
8353AQ 75 92
- ------------------- --------------------- -------------------
8325BM 90 92
- ------------------- --------------------- -------------------
8321CQ 88 98
- ------------------- --------------------- -------------------
7166BT 96 99
- ------------------- --------------------- -------------------
</TABLE>
6
<PAGE> 7
<TABLE>
<CAPTION>
- ------------------- --------------------- -------------------
Product Wafer Sort Yield Final Test Yield
- ------------------- --------------------- -------------------
<S> <C> <C>
7166BQ 96 99
- ------------------- --------------------- -------------------
5460CV 83 96
- ------------------- --------------------- -------------------
5460CP 83 96
- ------------------- --------------------- -------------------
4421AT 90 99
- ------------------- --------------------- -------------------
4421AQ 90 99
- ------------------- --------------------- -------------------
37C65CL-TR 78 97
- ------------------- --------------------- -------------------
37C65CL 78 97
- ------------------- --------------------- -------------------
33C93BY 76 94
- ------------------- --------------------- -------------------
33C93BL 76 94
- ------------------- --------------------- -------------------
</TABLE>
Add the following rows of additional products, and corresponding footnote 3:
<TABLE>
<CAPTION>
- ------------------- ------------------ ---------------------- ------------------------
Product Initial Price Wafer Sort Yield Final Test Yield
- ------------------- ------------------ ---------------------- ------------------------
<S> <C> <C> <C>
8375BT $2.77 94 98
- ------------------- ------------------ ---------------------- ------------------------
8210BT $2.21 77 97
- ------------------- ------------------ ---------------------- ------------------------
43C97B(1) $3.87 85 84
- ------------------- ------------------ ---------------------- ------------------------
43C97C(1) $3.87(3)
- ------------------- ------------------ ---------------------- ------------------------
37C65CY $1.34 78 97
- ------------------- ------------------ ---------------------- ------------------------
33C94CB $2.02 94 98
- ------------------- ------------------ ---------------------- ------------------------
</TABLE>
(3) indicates that part has not yet been qualified. Initial price shown is only
an estimate, assuming that qualification proceeds as expected, and is
subject to change. Actual initial price may be higher or lower, depending
on actual qualification. The estimated initial price shown shall be
replaced with the actual initial price once qualification has been
completed.
Exhibit D:
Delete the phrase ", plus Fifty Two Thousand Dollars ($52,000) for tester time
in support of quality/reliability" from the third paragraph of Section I of
Exhibit D and add the following sentence immediately thereafter: "Seller shall
provide quality/reliability support at the rate of One Hundred Twenty Dollars
($120) per hour."
Add the following to Sections III, IV, and V of Exhibit D:
III. Qualification of 43C97C and 5464B
Labor provided by Adaptec for qualification of the 43C97C and 5464B which falls
in the categories listed in item I above (Support services) shall be included in
the applicable fee for item I, with no additional amounts due from
STMicroelectronics to Adaptec for such labor.
STMicroelectronics personnel shall be responsible for testing and
characterization.
All costs for materials incurred for the qualification of 43C97C and 5464B shall
be paid directly by STMicroelectronics, Inc. or billed to STMicroelectronics by
Adaptec at the time when
7
<PAGE> 8
Adaptec incurs such expenses. Adapted shall conduct such qualification in
accordance with its customary business practices. Such costs shall be reimbursed
to Adapted at Adaptec's actual costs. Such costs include, without limitation,
costs for masks, wafers, packaging, reliability boards, load boards, probe
cards, and burn-in boards. Upon Adaptec's fulfillment of its obligation to
manufacture the 43C97C and 5464B for STMicroelectronics hereunder, any such
materials shall be transferred to STMicroelectronics.
IV. Support of Fastcat 2
Adaptec will authorize TSMC to use one Adaptec tester and one prober to sort
Fastcat 2 material for STMicroelectronics, Inc., for the period beginning upon
closing and ending on April 15, 1999.
V. Development of Software for SC212 Tester
Commencing upon a mutually agreed upon date, Adaptec shall provide to
STMicroelectronics, Inc., the services of one Adaptec employee, approved by
STMicroelectronics, for the purpose of advising STMicroelectronics in the
development of a software program for the SC212 tester. Such services will be
provided during regular business hours and for a period of no more than five
weeks. As consideration for such services, STMicroelectronics will pay Adaptec a
fee of $5000.00 for each week of such services.
SECTION 2. Reaffirmation. The Agreement, as supplemented and amended
hereby, is in all respects reaffirmed and ratified, and is, and shall continue
to be, in full force and effect.
8
<PAGE> 9
IN WITNESS WHEREOF, Seller and Purchaser have caused this Amendment No. 1
to be executed as of the date first written above by their respective officers
thereunto duly authorized.
ADAPTEC, INC.
ADAPTEC MFG. (S) PTE. LTD.
STMICROELECTRONICS, INC.
9
<PAGE> 1
EXHIBIT 99.1
PRESS RELEASE
MILPITAS, Calif. -- January 18, 1999 -- Adaptec, Inc. (NASDAQ:ADPT) announced
today that it has completed the sale of the company's Peripheral Technology
Solutions (PTS) group to STMicroelectronics, Inc. (formerly SGS-Thomson
Microelectronics). For more information on this Adaptec divestment, please see
Adaptec's November 24, 1998 press release "Adaptec Sells Semiconductor Group to
STMicroelectronics". The divestment is part of Adaptec's strategy to focus on
its core host adapter, RAID, and software businesses.
