Asset Acquisition Agreement

ASSET ACQUISITION AGREEMENT


This ASSET ACQUISITION AGREEMENT (this "AGREEMENT") is made and entered into as of March 24, 1998 (the "EFFECTIVE DATE"), by and among, on the one hand, Analog Devices, Inc., a Massachusetts corporation ("SELLER"), on behalf of itself and the Seller Subsidiaries (collectively "SELLER"), and, on the other hand, Adaptec, Inc., a Delaware corporation ("PURCHASER"), and Adaptec Singapore Mfg. (S) Pte. Ltd., a wholly-owned Singapore subsidiary of Purchaser ("SUB").


W I T N E S S E T H:


WHEREAS, Seller desires to sell and assign to Purchaser and Sub, and Purchaser and Sub desire to purchase and acquire from Seller, certain assets associated with Seller's Storage Products Business (as defined below), all upon the terms and subject to the conditions set forth in this Agreement; and


WHEREAS, Purchaser and Sub desire to enter into licenses to use certain intellectual property rights of Seller in connection with the design, development and manufacture of Products and commercial exploitation of technology associated with the Storage Products Business; and


WHEREAS, in connection with the sale of assets and licenses described above, Seller has permitted Purchaser to interview and make offers of employment to employees of Seller who work in the Storage Products 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 hereby agree as follows:


ARTICLE I


CERTAIN DEFINITIONS


SECTION 1.01. Certain Defined Terms. As used in this Agreement, the following terms shall have the following meanings:


"AFFILIATE" means, with respect to a specified person, any other person that directly or indirectly controls, is controlled by, or is under common control with, such specified person, except that the term "affiliate" shall not be deemed to apply to officers and directors of a party hereto acting in their own personal individual capacity and not for the benefit of or on behalf of a party hereto or such party, subsidiaries or entity affiliates.


"ANCILLARY AGREEMENTS" means, collectively, the Bills of Sale, the Patent Assignments, the Copyright Assignments, the Mask Work Assignments, the Technology and Patent License Agreement, the R&D Services and Transition Support Agreement, the Foundry Agreement and the Non-Competition Agreements (as such terms are defined herein).


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"BUSINESS ASSETS" means the Purchased Assets and the Licensed Assets (as each such term is defined below).


"BUSINESS DAY" means a day of the year on which banks are not required or authorized to be closed in the city of San Francisco, California.


"BUSINESS PLAN" means collectively that certain business plan for the Storage Products Business (as defined below), a copy of which has been delivered to Purchaser, together with that certain technology map for the Storage Products Business, a copy of which has been delivered to Purchaser.


"CIRCUITS" shall have the meaning ascribed to such term in the Technology and Patent License Agreement.


"COMPETITION ACT" means The Competition Act, 1991 (as amended) of Ireland.


"CONTROL" (including the terms "CONTROLLED BY" and "UNDER COMMON CONTROL WITH") means the possession, directly or indirectly, or as trustee or executor, of the power to direct or cause the direction of the management policies of a person, whether through the ownership of stock, as trustee or executor, by contract or otherwise.


"CO-OWNED PATENTS" means the Patent Assets listed on Schedule 15 hereto, subject to the Cross-License Agreements.


"COPYRIGHT ASSETS" means all copyrights, whether or not registered, owned by Seller as of the Closing Date, including all registrations and applications therefor, including those listed on SCHEDULE 1 hereto (the "LISTED COPYRIGHT ASSETS").


"CROSS-LICENSE AGREEMENTS" means those certain cross-license agreements entered into by Seller with third parties listed on SCHEDULES 2A AND 2B hereto.


"DOLLARS" or "$" means U.S. dollars.


"EMPLOYEE ASSETS" means all personal property assets owned (or leased) by Seller, wherever located, that are utilized by New Hires (as defined in Section 6.01(b)) in the normal course of the performing their duties for the Storage Products Business during the time period beginning on the Effective Date and ending on the Closing Date (as defined in Section 2.04 below), including work-stations, personal computers, personal digital assistants and all associated assignable licenses to use third-party software applications used thereon, excluding assets used on an incidental basis.


"ENCUMBRANCE" means any pledge, lien, collateral assignment, security interest, mortgage, deed of trust, title retention, conditional sale or other security arrangement, or any charge, adverse claim of title, ownership or use, or any other encumbrance of any kind, excluding the Cross-License Agreements.


"ENVIRONMENTAL LAWS" means all U.S. and non-U.S. federal, state, local laws and regulations relating to pollution, the protection of human health or the environment (including


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without limitation ambient air, surface water, ground water, land surface or subsurface strata), including without limitation laws and regulations relating to emissions, discharges, releases or threatened releases of Hazardous Substances, or otherwise relating to the manufacture, processing, distribution, use, treatment, disposal, transport or handling of Hazardous Substances, or relating to occupational health and safety.


"ERISA" means the U.S. Employee Retirement Income Security Act of 1974, as amended, and the rulings and regulations promulgated thereunder.


"EXCLUDED ASSETS" means (i) the Retained Assets (as defined below), (ii) all Seller's cash, bank accounts and securities; (iii) all Seller's accounts receivable, unbilled receivables, accounts payable, notes and other amounts receivable or payable from or to third parties; (iv) all insurance policies of Seller and all rights of Seller of every nature and description under or arising out of such insurance policies; (v) claims for refunds of Taxes (as defined below) actually paid by Seller prior to the Closing Date; (vi) 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; and (vii) lease or other agreements related to the Facilities (as defined in Section 3.19 below).


"GOVERNMENTAL ANTITRUST AUTHORITY" means any non-U.S., federal, state or local governmental or quasi-governmental authority charged with the administration or enforcement of antitrust laws.


"HAZARDOUS SUBSTANCES" means: (i) any pollutant, contaminant, toxic, hazardous or noxious substance or waste which is regulated by the laws of any state, local, federal or other governmental authority or jurisdiction, including but not limited to the United States, the Republic of Ireland and the States of Delaware and North Carolina, and includes but is not limited to (a) any oil or petroleum compounds, flammable substances, explosives, radioactive materials, or any other materials or pollutants which pose a hazard to persons or cause any real property to be in violation of any Environmental Laws, (b) to the extent so regulated, asbestos or any asbestos-containing material of any kind or character, (c) polychlorinated biphenyls, as regulated by the Toxic Substances Control Act, 15 U.S.C. Section 2601 et seq., (d) any materials or substances designated as "hazardous substances" pursuant to (1) Section 311 of the Clean Water Act, 33 U.S.C. Section 1251 et seq., or (2) Section 101 of the Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C. Section 9601 et seq., (e) "chemical substance," "new chemical substance," or "hazardous chemical substance or mixture" pursuant to Sections 3, 6 and 7 of the Toxic Substances Control Act, 15 U.S.C. Section 2601 et seq., and (f) any "hazardous waste" pursuant to Section 1004 of the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901 et seq.; and (ii) as of any date of determination, any additional substances or materials which now or hereafter may be incorporated in or added to the definition of "chemical substance," "new chemical substance," "hazardous chemical substance or mixture," "hazardous waste," "hazardous substance" or "toxic substance" or similar substance for purposes of any Environmental Law.


"HSR ACT" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations thereunder.


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"INTANGIBLE ASSETS" means, collectively, (i) the Patent Assets, the Copyright Assets, and the Mask Work Assets; and (ii) all other intangible assets, properties and rights of Seller including, without limitation, technology, know-how and technical and business trade secrets and all rights therein (whether or not protectable under any Intellectual Property Rights) existing as of the Closing Date.


"INTELLECTUAL PROPERTY RIGHTS" means, collectively, all of the following worldwide intangible legal rights, including those existing or acquired by ownership, license (to the extent such can be sublicensed) or other legal operation, whether or not filed, perfected, registered or recorded, existing as of the Closing Date in or to: (i) the Patent Assets; (ii) the Copyright Assets; (iii) the Mask Work Assets; (iv) Seller's rights in trade secrets; (v) all rights relating to the protection of the foregoing; and (vi) all rights to sue or make any claims for any past, present or future infringement, misappropriation or unauthorized use of any of the foregoing rights and the right to all income, royalties, damages and other payments that are now or may hereafter become due or payable with respect to any of the foregoing rights, including without limitation damages for past, present or future infringement, misappropriation or unauthorized use thereof.


"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.


"KEY ASSETS" means the Purchased Assets, Licensed Technology Deliverables and Circuits.


"LIABILITIES" (or when used with reference to a single item described below, "LIABILITY") means debts, liabilities and obligations (whether pecuniary or not, including without limitation obligations to perform or forbear from performing acts or services), fines or penalties, whether accrued or fixed, absolute or contingent, matured or unmatured, determined or determinable, known or unknown, including without limitation those arising under any law, action or governmental order, liabilities for Taxes and those arising under any contract, agreement, arrangement, commitment or undertaking of any kind whatsoever (whether written or oral, express or implied), including those arising under any Seller Contract, whether or not related to the Products and/or the Storage Products Business.


"LICENSED ASSETS" means the Intangible Assets and all Intellectual Property Rights therein and thereto, but excluding the Listed Patent Assets, the Listed Copyrights Assets, the Mask Work Assets, the Retained Assets and other Intellectual Property Rights licensed to Seller without the rights to sublicense.


"LICENSED TECHNOLOGY DELIVERABLES" means the deliverables listed on SCHEDULE 3A hereto.


"MASK WORK ASSETS" means the mask works, whether or not registered, including all registrations and applications therefor, listed on SCHEDULE 4 hereto; such schedule includes Seller's internal number for each such mask work and correlates each mask work to the applicable Product(s).


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"MATERIAL" means any fact, event, action or failure to act, or other circumstance with respect to, involving or affecting Seller, any Seller Subsidiary or any other affiliate of Seller that: (i) involves in excess of $100,000 or that results or is reasonably likely to result in a financial loss of at least $100,000; (ii) involves exclusivity or non-competition covenants or arrangements; or (iii) involves Intellectual Property Rights.


"MERGERS ACT" means the Mergers, Takeovers and Monopolies Control Act (1978) (as amended) of Ireland.


"PATENT ASSETS" means all patents, patent applications, patent disclosures and related patent rights, including any and all continuations, divisions, reissues, reexaminations, or extensions thereof, which have been filed, issued or acquired by Seller as of the Closing Date, all inventions conceived of or reduced to practice as of the Closing Date, including those listed on SCHEDULE 5 hereto (the "LISTED PATENT ASSETS"), subject to the Cross-License Agreements.


"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.


"PRODUCT DESIGNS" means the particular arrangement of the Circuits that comprise the Products, as reflected in the layouts and schematic databases listed on SCHEDULE 6. By way of clarification, "Product Design" does not include the particular individual Circuits included in the Products.


"PRODUCTS" means the current products and products under development of Seller listed in SCHEDULE 7 hereto, whether or not ever commercially offered.


"RETAINED ASSETS" means those tangible and intangible assets owned by or licensed to Seller and any Seller Subsidiary or affiliate of Seller that are necessary or required to enable Purchaser, following the Closing to own, conduct, operate and continue the Storage Products Business substantially as historically conducted or as proposed to be conducted through the Closing Date, other than assets used on a merely incidental basis, that will not be sold to Purchaser hereunder or licensed to Purchaser pursuant to the Technology and Patent License Agreement, which assets are listed on SCHEDULE 8 hereto.


"SELLER CONTRACTS" means all leases, licenses and other agreements, contracts, understandings, arrangements, commitments and purchase orders listed on SCHEDULE 9 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": A particular fact or other matter shall be deemed to be within "Seller's knowledge" if any officer or, with respect to the particular matters they are responsible for, any employee of Seller, any Seller Subsidiary or any other affiliate of Seller, has knowledge of such fact or other matter. An individual shall be deemed to have "knowledge" of a particular fact or other matter if (a) such individual is actually aware of such fact or other matter, or (b) such individual would reasonably be expected to be aware of such fact by virtue of performing


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his or her duties. Notwithstanding the foregoing, solely for purposes of Section 3.17 below, an individual shall be deemed to "have knowledge" of a particular fact or other matter only if such individual is actually aware of such fact or other matter.


"SELLER SUBSIDIARY" shall mean any past or present subsidiary or branch of Seller.


"SOLD TECHNOLOGY DELIVERABLES" means the deliverables listed on SCHEDULE 3B hereto.


"STORAGE PERIPHERALS" means optical disk drives, tape drives, removable disk drives, rigid disk drives, and any combination of the foregoing.


"STORAGE PRODUCTS 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 the Product Designs for Storage Peripherals.


"TANGIBLE ASSETS" means, collectively, the Employee Assets and other tangible personal property assets, wherever located, listed on SCHEDULE 10 hereto (the "TANGIBLE ASSETS SCHEDULE").


"TAX" or "TAXES" means all taxes or similar governmental charge, impost 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 the United States, Ireland, The Netherlands, or any state, county, provincial, local or foreign government or any instrumentality, subdivision or agency thereof.


"THIRD PARTY ASSETS" means (i) all personal property assets, wherever located, whether tangible or intangible that are licensed or leased to Seller, any Seller Subsidiary or any other affiliate of Seller by a third party under any Seller Contract; and (ii) all Seller's license or other rights to such third-party assets under any Seller Contract.


"UNDERTAKINGS LAW" means the European Communities Safeguarding of Employees Rights on Transfer of Undertakings Regulations 1980 which implements the European Union Acquired Rights Directive 1977.


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ARTICLE II


ACQUISITION OF ASSETS


SECTION 2.01. Assets to Be Acquired.


(a) Purchased Assets. Subject to the terms and conditions of this Agreement (including without limitation the allocation provisions of Section 2.08), on the Closing Date Seller shall sell, assign, transfer, convey and deliver to Purchaser and Sub (or cause to be sold, assigned, transferred, conveyed and delivered to Purchaser and Sub) and Purchaser and Sub shall purchase and acquire from Seller, free and clear of any and all Encumbrances whatsoever, all right, title and interest in and to all of the following (collectively, the "PURCHASED ASSETS"):


(i) the Products;


(ii) the Product Designs;


(iii) the Tangible Assets;


(iv) the Listed Patent Assets;


(v) an undivided one-half interest in the Co-Owned
Patents;


(vi) the Listed Copyright Assets;


(vii) the Mask Work Assets;


(viii) the Sold Technology Deliverables;


(ix) all worldwide Intellectual Property Rights of
Seller in and to all of the assets described in
clauses (ii) through (viii) above (collectively,
the "INTELLECTUAL PROPERTY ASSETS");


(x) the right to enforce confidentiality,
non-disclosure, employee invention assignment
and other proprietary rights agreements between
Seller and New Hires (as defined in Section
6.01(b) below) with respect to the Storage
Products Business;


(xi) all of Seller's rights under the Seller
Contracts, including Third Party Assets; and


(xii) true, accurate and complete copies of Seller's
marketing and sales information, pricing,
marketing plans, business plans, financial and
business projections and other files and records
pertaining specifically to the Storage Products
Business, but excluding any personnel files of
any past or present employee of Seller
(collectively, the "BUSINESS RECORDS").


(b) Licensed Assets. The parties acknowledge that certain assets related to the Storage Products Business also are essential to other businesses conducted by Seller.


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Accordingly, with respect to the Licensed Assets Seller shall provide Purchaser a license on the terms and conditions of that certain Technology and Patent License Agreement, in substantially the form of Exhibit A hereto, to be entered into by the parties as of the Closing Date (the "TECHNOLOGY AND PATENT LICENSE AGREEMENT").


(c) Other Assets. Should it be determined at any time after the Closing Date that any tangible or intangible assets which, pursuant to this Agreement, should have been transferred to Purchaser, are still in the possession of Seller, Seller Subsidiaries or Affiliates of Seller, such assets (and related rights) shall be delivered to Purchaser by Seller (or Seller shall cause them to be delivered) promptly without additional charge.


SECTION 2.02. No Liabilities Assumed. As a material inducement and consideration to Purchaser to enter into this Agreement and perform its obligations hereunder, the parties agree that Purchaser shall assume no obligations or Liabilities whatsoever from Seller or any Seller Subsidiary or affiliate (whether now existing or hereafter arising), and Seller, all Seller Subsidiaries and all Seller's other affiliates shall retain, and shall be solely responsible and liable for paying, performing and discharging when due, all such Liabilities (collectively, the "EXCLUDED LIABILITIES"). By way of example and not by way of limitation, the Excluded Liabilities not being assumed by Purchaser include those liabilities described on EXHIBIT B hereto.


SECTION 2.03. Purchase Price; Other Payments; Allocation of Purchase Price.


(a) Payment at Closing. The aggregate purchase price for purchase of the Purchased Assets (the "PURCHASE PRICE") of Twenty-Seven Million Dollars ($27,000,000) (the "CLOSING PAYMENT") shall be paid by Purchaser and Sub to Seller on the Closing Date.


(b) Product Development Fee. Purchaser shall pay Seller an aggregate of Seven Million Dollars ($7,000,000) as a product development fee ("DEVELOPMENT FEE"), payable in two equal installments of Three Million Five Hundred Thousand Dollars ($3,500,000) at the end of the first two fiscal quarters of Purchaser following the Closing.


(c) Allocation and Characterization of Purchase Price and Other Payments.


(i) Purchase Price. Prior to the Closing Date, Purchaser and Seller shall use their reasonable efforts to agree to allocate, among the Purchased Assets, in accordance with the allocation requirements of Section 1060 of the Internal Revenue Code, the Closing Payment. The allocation of the Purchase Price agreed on by the parties pursuant to this Section shall be reduced to a writing executed by Seller and Purchaser that shall be delivered by Seller and Purchaser to each other at the Closing (the "PURCHASE PRICE ALLOCATION 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


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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 2.04. Closing. Subject to the terms and conditions of this Agreement, the sale, purchase and transfer of the Business Assets and the assumption of the Assumed Liabilities contemplated hereby shall take place at a closing at the offices of Fenwick & West LLP, Two Palo Alto Square, Palo Alto, California (the "CLOSING") 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 2.05. Closing Deliveries by Seller. At the Closing, Seller shall deliver or cause to be delivered to Purchaser:


(a) executed counterparts of all of the Ancillary Agreements to be executed and entered into by Seller;


(b) the Purchase Price Allocation Agreement;


(c) a receipt for the Closing Payment; and


(d) all other items, tangibles, agreements, documents, certificates and payments to be delivered by Seller at the Closing under Section 8.02 of this Agreement or any other provision hereof or pursuant to any Ancillary Agreement.


SECTION 2.06. Closing Deliveries by Purchaser. At the Closing, Purchaser and Sub shall deliver to Seller:


(a) the Closing Payment of $27,000,000 in cash (by wire transfer) in accordance with Section 2.03 against receipt thereof from Seller;


(b) executed counterparts of all of the Ancillary Agreements to be executed and entered into by Purchaser;


(c) the Purchase Price Allocation Agreement; and


(d) all other items, tangibles, agreements, documents, certificates and payments to be delivered by Purchaser at the Closing under Section 8.01 of this Agreement or any other provision hereof or pursuant to any Ancillary Agreement.


SECTION 2.07. Unassignable Assets. Notwithstanding any other provision of this Agreement or any of the Ancillary Agreements, but subject to Section 8.02(q) hereof, 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 and Sub, or if such assignment or transfer would constitute a breach thereof or a violation of any applicable law, then neither this Agreement nor such Ancillary Agreements shall constitute an assignment or transfer (or an


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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 whose ass ...